During the pandemic, the housing market in the United States skyrocketed. House prices are rising at unprecedented rates, according to the National Association of Realtors, with median prices of existing home sales increasing 23.4 percent from July 2020 to July 2021.

Frustration is widespread among house-hunters in this market, with properties selling in an average of 17 days.

If you don’t buy a house this year, you’ll need a safe place to stash your home down payment funds until the opportune moment comes. Here are some things that savers should think about to protect their hard-earned money.

How Soon Will You Withdraw the Money?

Everyone’s path to becoming a homeowner is a little different. If you didn’t buy a property this year, you might want to take a break—or you might be on the verge of pounce on the next one you see.

The place of your down payment savings is determined by your time frame and the ease with which you wish to access it. 

If you put off buying a new home for a while, you’ll have more options for putting your money aside. If you want to wait longer than two years but less than five, a low-risk bond fund may make sense.

“While you should still be conservative,” “with a longer time horizon, you should be able to obtain an extra percent or two every year on your investments without taking on a lot of risks.”

What’s the Size of Your Home Down Payment Savings?

The majority of people feel they need to save 20% of their income for a down payment on a home. How much money do you have set aside for your home? It depends on the type of home loan you take out and the cost of housing in your region.

Conventional loans, for example, often require greater down payments from borrowers, but FHA loans have the more lenient down payment and credit score criteria.

According to the National Association of Realtors Research Group’s 2020 Downpayment Expectations & Hurdles to Homeownership report, the median down payment for homebuyers was only 12%.

As of July 2021, the Federal Reserve Bank of St. Louis reported an average house sale price of $434,200. A 12 percent down payment using that figure would be more than $52,000—and that doesn’t include closing costs, which can range from 2% to 5% of the home’s purchase price.

Size does matter when it comes to saving money. Higher balances provide more options to earn money while you wait for the ideal house to come along.

However, you don’t want to put your money into something that could damage your savings. Buying a home is stressful enough, so you’ll want to have the funds on hand when you’re ready to buy.

How Much Risk Are You Comfortable With?

You may have more possibilities if you’re more comfortable with risk and have a larger sum of money.

You don’t want to put all of your eggs in one basket, so consider dividing your funds. You could, for example, put a portion of your money in a savings account and the rest in investment funds.

Weiss warns that you must be aware of the trade-offs: “While you may be able to achieve your objective sooner, you may also be able to extend the time it takes to buy a home.”

If you’re willing to take a chance, you may put 80% of your down payment into a high-yield savings account and 20% into investments. “Start rebalancing more toward cash as you get closer to your goal [of buying a house],” Weiss advises.

Best Places to Keep Your Home Down Payment

You’ll need a safe place to keep your money now that your home-buying plans have been put on hold. The best places to put your down payment are listed below.

Savings Account

A savings account is a straightforward option. You likely already have one at your bank or credit union, where you have a checking account.

Your money is safe because it is insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Association (NCUA).

A word of advice: keep your down payment separate from your emergency fund or other reserves. You could even start a new account with a different bank. You won’t be tempted to use it in an emergency or for everyday purchases this way.

High-Yield Savings Account

Both Weiss and Sprung propose putting your down payment money in a high-yield savings account.

“High” is a relative term, according to Sprung, and is about equivalent to 0.50 percent to 1.25 percent. “It may be tedious, but ensuring that all of the finances are available when you need them will hopefully alleviate some of the stress that comes with buying a home.”

Money Market Account

If you keep your money in a money market account, you’ll have little to no risk. They’re virtually usually FDIC-insured, so double-check before depositing your money.

A word of caution: a money market account is not the same as money market funds. A mutual fund investment in money market funds is a form of a mutual fund. Money market funds are not FDIC-insured, despite their low risk.

CD

A CD, or certificate of deposit, is similar to a savings account except that you must commit to depositing your money for a set amount of time. If you take money out of a savings account before the end of the term, you will normally be fined.

Depending on the minimum deposit amount and how long you want to wait to buy a house, it may pay a higher interest rate. The FDIC, for example, projected a low 0.03 percent interest rate on a one-month CD in August 2021, while a 36-month CD earned 0.21 percent.

Brokerage Account

You can put your down payment in a brokerage account if you’re willing to take on more risk. Your account could allow you to invest in stocks and mutual funds, which could make you more money than a high-yield savings account or a CD.

However, investments are not protected by the FDIC, and the stock market can be volatile.

“Investing it in a brokerage account exposes you to the risk of having less money than you do now if your timing is just off,”.

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