Where to Stash Your Down Payment

When you are ready to buy a house, everyone knows you must have a down payment. This requires a giant lump of cash. Where do you put it while you are saving though?

 In order to protect yourself, you’ll want to place it in “cash equivalents”. These are protected by the Federal Deposit Insurance Corporation (FDIC) or the U.S. Government. But don’t trust the government with your money, they suck at handling money, but I digress. This money won’t give you much of a return, but it will be readily available when you need it.

 Listed below are some RISK-FREE savings options.

 Online Savings Accounts

Definitely consider an online bank account since they have the best interest rates. If you do your banking online you won’t have to work around the banks hours. This also makes banking so much easier because of automatic transfers and direct deposits. Checking your account info is also a breeze because you can do it from your phone.

You will also be less likely to go grab it out of the bank and spend it elsewhere. This way the money can stay in the bank and be used as you intended.

The following websites were ranked as some of the best savings accounts: GE Capital Bank, MySavingsDirect, Barclays, iGoBanking.com, and Ally Bank.

 CD’s

Just like savings accounts, most CD’s are FDIC insured. Unlike savings accounts, you can be penalized for withdrawing early. Investing in a short-term CD is an option if you feel you might withdraw it early. However, the longer you sign up for the better the interest rate.

Another option with CD’s is called laddering. Laddering allows you to divide up your time periods for a certain amount of cash. You can lock up a chunk of cash with three months, and another chunk for a year or more.

 Money Market Accounts

Money market accounts are another option you can establish at your bank. However, some of their highest-yielding options base their yields on a beginning rate that drops over time. These are also FDIC insured, but do not confuse these with money mutual funds, which are not FDIC insured.

High-yield Checking Account

Try one of these FDIC insured accounts. Most financial institutions offer them with interest rates in excess of 2%. The downside is the APR comes with provisos. As owner of the account you must meet some basic requirements like having a certain number of debit transactions per month, signing up for direct deposit, and enroll in electronic statements.

There is also a limit on the amount of money on which the interest can be paid. This is the institutions way of imposing balance caps on their high-yield accounts. The limits range from $500-$25,000, but the average cap is around $17,000.

 

These are just a few options where you can store your down payment. There are other, less safe options of course, but it’s all up to you. One final option is to pile cold-hard cash underneath your house like Walter White. Cash is accepted everywhere, and 99.9% of all businesses will gladly accept it.  

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