Saving for a Home Down Payment? Where to Invest

Saving for a home down payment can seem like a big job, but with the right approach, you should be able to do it fairly quickly. When you are saving your money, you may be confused as to where you should keep it. Here are a few things to consider about saving for a home down payment.


Even though there are some mortgage programs out there that will allow you to get 100 percent financing, these are fairly rare. Even if you can get one, you are going to have to pay private mortgage insurance. Private mortgage insurance is going to increase your monthly mortgage payment which will most likely force you to buy a cheaper house. If you want to purchase a house without having to pay for private mortgage insurance, you are going to need to come up with 20 percent for the down payment. This is going to be a fairly large sum of money that you have to save. Many people are confused as to what they should do with this amount of money while they are saving. Some of them think that you should invest it while others want to keep it in a standard savings account. 

Avoid Investing

If you are saving for a home down payment, you will want to avoid investing this money in risky investments. Many people put it into the stock market or into a traditional mutual fund. While you could potentially get some nice returns with these investments, you could also lose your entire investment. Your home down payment is not something that you want to risk. If you lose the money for your home down payment, you may have to wait many more years before you can purchase a house. By this time, you may have passed the time period in your life in which you really wanted or needed the house. It is much safer to avoid traditional investments so that there is no risk that you will lose the money.

Cash Equivalents

When you are saving for a home down payment, you may want to consider putting your money into cash equivalents. Cash equivalents are low risk investments that are basically the same thing as cash. You can easily get access to the money when you need it and there is little risk of losing it. Some common examples of cash equivalents are money market accounts or money market mutual funds. You could also put your money into a savings account that provides a higher rate of interest. Cash equivalents provide you with a little bit of a return, but there is basically no risk with these types of investments. You are going to be able to put your money into an account that will be there when you need it. These types of investments are considered to be very safe and you do not have to worry about losing money for your down payment.

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