For many Americans, accumulating funds for a home down payment presents a significant financial challenge. Recent data from ATTOM reveals the national median home price reached $365,000 in the fourth quarter of 2025. A standard 20 percent down payment on such a property would amount to $73,000.
Savers aiming for this target must decide where to place their money. Financial experts emphasize the need for accounts that balance accessibility, safety, and competitive interest growth.
High-yield savings accounts are frequently recommended. These accounts offer annual percentage yields significantly above national averages, sometimes exceeding standard rates by more than ten times. Funds remain accessible for withdrawal, though some institutions may impose monthly transaction limits. The interest rates on these accounts are variable and can change.
Certificates of deposit provide an alternative. CDs typically offer fixed, higher interest rates for a set term. Current market offerings can reach above 4% APY. However, accessing funds before the CD matures usually triggers an early withdrawal penalty.
Money market accounts combine features of checking and savings accounts. They often provide competitive, variable interest rates and include debit card or check-writing access. The primary risk involves potentially mixing spending money with dedicated savings.
First-time home buyer savings accounts, available in select states, offer potential state tax deductions. Contributions may reduce taxable income, and earned interest might be tax-advantaged. These funds must be used for approved homebuying expenses like down payments or closing costs. States currently offering these accounts include Alabama, Colorado, Idaho, Iowa, Kansas, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, Ohio, Oklahoma, Oregon, and Virginia. Connecticut plans to introduce them in 2027. States like Illinois, Massachusetts, and Pennsylvania are considering similar programs.
Individual development accounts represent another resource, particularly for low- to moderate-income buyers. These programs, not available in all states, may provide matching funds to accelerate savings. For example, a program in Utah offers a dollar-for-dollar match up to $4,000 for qualified expenses like home purchases. Such programs often require a participation period of 12 to 36 months.
Choosing the right account depends on individual financial circumstances and goals. Comparing options from multiple institutions is advised, focusing on fees, interest rates, and helpful features like automated savings tools or user-friendly digital platforms.