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How far away is closing?
A down payment comes with a deadline, and that changes the question. Arriving with every dollar on closing day matters more than chasing the last fraction of a point of yield, so this plan starts with your date.
Where should I keep down payment money I will need in one to three years?
Keep it in insured, stable accounts: high-yield savings for flexibility, and CDs or Treasury bills that end on or before your closing date.
Today the top savings rate in our snapshot is 4.27% and the best CD is 4.95%. Your closing date and your taxes can matter more than the gap between them. For a shorter window and the product-by-product comparison, see where to park a home down payment.
Is a CD ladder better than a savings account for a down payment?
Only if your closing date is firm and the after-tax gain is worth the effort. Savings is flexible, and a ladder adds rate certainty.
The calculator above places your current savings and each monthly deposit into the longest CD that ends on or before closing day, and rolls leftover months into savings. Try the fixed-term option to see the risk. A CD that ends after closing day shows up as a warning in the result and as a grey dot past the closing line on the maturity timeline. If you want the ladder mechanics, read the CD ladder chapter.
Can Treasury bills work for a down payment?
Yes, if you can live with their terms. Bill interest is taxed federally but not by your state or city,1 which helps in a high-tax state.
Bills are sold in terms of 4, 6, 8, 13, 17, 26 and 52 weeks,2 so a plan longer than a year means rolling into new bills as each one matures. The tool models that by using the longest bill that ends on or before closing for each deposit, and the one-year Treasury yield in our snapshot (4.40%) as the bill rate. A bill you buy at auction can pay differently. For the ladder idea with a known spending date, see a T-bill ladder for a known spending date.
Will I reach my down payment target?
The result above compares your projected closing-day balance with your target, after tax, and tells you the monthly amount that closes any gap.
The stacked chart splits the projection into three layers: what you had, what you added, and what you earned after tax. In the starting example, earnings are the thinnest layer by a wide margin, and the product you pick moves the total far less than the amount you add each month. Use the shortfall figure to decide whether to add to your monthly amount or move the date.
Should I use a money market fund for a down payment?
It is an option for money you may need early, but it is not insured. A money market fund is an investment, not guaranteed by the FDIC like a bank deposit.3
The calculator lists it so you can compare, and savings covers the same need with deposit insurance behind it. If your balance is large, the insured limit applies per bank and per ownership category.4 A large balance that crosses it is covered in FDIC coverage for families.
What if the money is coming from a sale or a bonus?
Park the lump sum first, then decide how much of it needs a long plan. Money you will spend within a few months belongs in the flexible slice, and only the part with a long runway needs a ladder. Closing costs and moving expenses tend to arrive at the same time as the down payment, so keep a cushion in savings that the ladder never touches. Where to park a windfall covers the first months, and this page covers the rest of the way to closing. To work out how much to set aside each month, try the savings goal calculator.