What Is a CD Account? How First-Time Homebuyers Can Use One to Save for a Home

This page contains affiliate links. If you click through, I may receive compensation. This helps support my work at no extra cost to you.

Saving for your first home can feel overwhelming, especially when you’re not sure where to put your money for the best results. If you want a safe, predictable way to grow your down payment, a Certificate of Deposit (CD) account might be just what you need. Let’s break down what a CD is, how it works, and why it could be a smart move for first-time homebuyers.

What Is a CD Account?

A Certificate of Deposit (CD) is a special type of savings account offered by banks and credit unions. You deposit a fixed amount of money for a set period of time, usually anywhere from a few months to several years. In exchange, the bank pays you a higher interest rate than a regular savings account. The catch? You agree not to touch the money until the CD “matures” (reaches the end of its term).

How Does a CD Work?

• Choose Your Term: Decide how long you want to keep your money in the CD (common terms are 6 months, 1 year, 2 years, or more).

• Lock In Your Rate: The interest rate is fixed, so you know exactly how much you’ll earn.

• No Withdrawals: You can’t access the funds until the term ends without paying a penalty. So it’s great for people who want to avoid the temptation to dip into their savings.

  
  

Why Should First-Time Homebuyers Consider a CD Account?

• Safe and Secure: CDs are FDIC-insured (up to $250,000 per bank), so your money is protected.

• Higher Interest: CDs usually pay more interest than regular savings accounts, helping your down payment grow faster.

• Disciplined Saving: Because you can’t withdraw without a penalty, your home fund stays on track.

• Predictable Growth: You’ll know exactly how much you’ll have at the end of the term—perfect for planning your homebuying timeline.

  
  

How to Use a CD to Save for Your First Home

1. Set Your Goal: Figure out how much you need for your down payment and when you want to buy.

2. Pick the Right Term: Choose a CD term that matches your timeline (for example, a 1-year CD if you plan to buy next year).

3. Deposit Your Savings: Put your home fund into the CD and let it grow.

4. Let It Mature: When your CD matures, you’ll have your original savings plus interest, ready to put toward your new home.

   
   

Ready to Find the Best CD Account? Compare Options with SuperMoney

Not all CDs are created equal. SuperMoney lets you compare CD accounts from top banks and credit unions, so you can find the best rates and terms for your homebuying goals.

Check out SuperMoney’s CD account comparison tool and start growing your down payment today!