Invest Real Estate

The Smartest Places To Put Your Home’s Down Payment

Brittany VanDerBill  |  November 3, 2021

Waiting to find your dream home? Here’s what to do with your down payment — plus one thing you shouldn’t do with your down payment.

Anyone who has been hoping to find a house in this crazy market knows it’s not exactly easy—and that’s a bit of an understatement. If you saved up for a down payment on that dream home but have found yourself frozen out of the market due to crazy prices, you’re not alone. But that can leave you wondering what to do with the down payment you’ve saved up. 

On one hand, you really want that money accessible if you’re still actively in the market for a new home. On the other hand, it can be frustrating not to earn anything on all that money. So, what’s the right thing to do with the cash? We asked our experts and came up with some options that will help you decide just what to do with that down payment. 


It’s completely understandable if you’re feeling frustrated that you’ve saved up a down payment and spent time searching for a new home, only to come up empty-handed. It can feel equally irritating to have all that cash handy that isn’t even earning you anything.

First, take a deep breath. Instead of feeling frustrated, Elizabeth Westendorf, CFP® professional with Fearless Finance, recommends “reframing the thought process.” She advises, “This money’s primary objective is to be available when you finally have an offer accepted and are ready to buy a home. That means that growth is a distant secondary objective, especially if you’re looking to buy a home in the short-term!”

By shifting your thoughts on the down payment and what it can ultimately do for you, you can help ease some of your frustration with the process. 


If you want to earn a return on your down payment as you await your dream home, you may be tempted to try the stock market. However, Leanna Devinney, Vice President, Branch Leader at Fidelity Investments, offers some words of caution on that. 

She says, “For those actively trying to purchase a home, investing in the stock market, knowing that it can fluctuate in day-to-day volatility, may not be the right fit.” Devinney notes that buying a home, especially right now, requires being flexible and accessible. 

Funneling your cash into the stock market may mean your down payment is not only at risk, but it’s also not going to be as accessible. That could cause a snag if you do end up finding a home sooner rather than later.


Another common investment option is a Certificate of Deposit, or CD. These generally offer a modest interest rate, but they usually require you to leave your money in the account for a set amount of time. Devinney tells us, “Keep in mind that even options such as CDs and treasuries come with a fixed period of time (three months, six months, etc.) and may impact the accessibility of your funds.”

If you think it might be several months before you put an offer on a home, then you may want to look into a CD. On the other hand, you may not want your money tied up for even just three months if you’re hoping to purchase a house as soon as possible. 


“Given the shorter time horizon of hoping to buy a home soon, putting your money in cash, money market or savings accounts may make the most sense. In this instance, return of your money may be more important than return on your money,” advises Devinney. 

Westendorf agrees, especially if keeping your down payment secure is your main goal. She recommends “a High Yield Savings Account, which is still FDIC insured but pays 10 {times} the interest of a traditional bank savings account.”

When looking for a savings account, Westendorf says that you shouldn’t need to pay a fee for them. Usually, there are many free savings accounts offered by various banks. 

It’s worth taking some time to research so you can find something without fees that would chip away at your down payment.


Buying a home is exciting, but it’s also challenging—especially in today’s market. And if that down payment is burning a hole in your pocket, you’ll want to be careful about what you do with it. 

Keeping your down payment in cash or stashing it in an accessible savings account while you continue the search might be your wisest move. You could also try a CD if you know you won’t need the down payment right away. Above all, be cautious about investing in the stock market so you can protect the work you did saving up your down payment. 

It won’t be long until you find that dream home, and you’ll want your cash handy to help your offer get accepted!



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