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A shift in how Americans manage their savings is revealing that many potential homebuyers may have stronger financial reserves than traditional banking data suggests. Despite stagnant checking and savings account balances, households are increasingly moving cash into higher-yield accounts like money market funds and Certificates of Deposit (CDs). This strategic move to combat inflation and grow down payment funds faster has significant implications for the housing market and the mortgage application process. Understanding the liquidity requirements for mortgage underwriting is critical for buyers using these alternative accounts.
After years of elevated inflation, households are rethinking where they store their cash. The primary motivation is to protect savings from losing value and to accelerate growth towards financial goals, such as saving for a down payment. Instead of leaving funds in low- or no-interest checking accounts, people are allocating money to vehicles that offer better returns.
According to an analysis of 4.7 million U.S. households, while median traditional bank account balances have grown only 23% since 2019—falling short of expected growth—total cash reserves including brokerage accounts and CDs were up 3-5% year-over-year as of mid-2025. This indicates a broader trend of financial diversification beyond standard banking products.
| Account Type | Typical Interest | Best For | Key Consideration for Homebuyers |
|---|---|---|---|
| Traditional Savings | Very Low (0.01%-0.10% APY) | Immediate access to cash | Low growth, but fully liquid for closing |
| Money Market Fund | Higher (4.0%+ APY) | Short-term growth with good access | Funds are accessible, but transfers take days |
| Certificate of Deposit (CD) | Higher (4.5%+ APY) | Maximizing returns for set periods | Early withdrawal penalties can be significant |
| Brokerage Account | Varies by investment | Long-term growth potential | Selling assets takes time; requires documentation |
This movement of cash suggests that the affordability picture for potential homebuyers might be more complex than it appears. The ability to save for a down payment, which can take an average of 12 years, is being aided by these higher-yield strategies. Even modest returns can help buyers reach their financial milestones faster.
“We’re definitely seeing more clients diversify where they keep their cash,” says Alex Shekhtman, CEO and founder of LBC Mortgage. “High-yield accounts, CDs, money market funds—these are now part of the homebuying conversation. It’s a strategy to outpace inflation while their plans take shape.” This financial awareness means that some buyers may be more prepared than their standard bank statements indicate.
The crucial factor for buyers using these alternative accounts is understanding liquidity and documentation requirements. When applying for a mortgage, lenders need to verify the source of your down payment funds and ensure they are accessible without penalty.
“If a client’s funds are in a CD or brokerage, we have to see accessibility—can the money be pulled without penalty? Is it seasoned? Can it be documented properly?” Shekhtman explains. Seasoned funds refer to money that has been in the borrower's account for at least two months, which helps lenders verify its legitimacy. This is not a dealbreaker, but it requires advance planning to avoid delays during the underwriting process.
The optimal strategy depends on your homebuying timeline. Based on our experience assessment, if you are more than a few months away from purchasing a home, utilizing higher-yield accounts can be a smart way to grow your savings. However, if you are actively searching and plan to make an offer soon, liquidity is paramount.
“If they’re close to making an offer, keeping it liquid and ready is still the safest play,” Shekhtman advises. The key is to balance the pursuit of higher returns with the need for immediate access when you find the right property and need to provide proof of funds quickly.
To prepare for a mortgage application, buyers should:
This trend reflects a positive shift towards greater financial strategy among homebuyers. By making informed decisions about where to hold savings, buyers can work more effectively toward homeownership while navigating the specific requirements of the mortgage process.
