Definition:
A money market account is a type of savings account offered by banks and credit unions that typically earns higher interest than a regular savings account and allows limited check-writing or debit access.
Example:
When Nina applies for a mortgage, she shows the lender her money market account holding $25,000. She plans to use this money for her down payment and closing costs. Since it’s easily accessible and earns interest, it qualifies as a liquid asset.
Explanation:
Money market accounts combine features of both savings and checking accounts. They are insured by the FDIC (for banks) or NCUA (for credit unions), making them a secure place to keep funds. These accounts usually:
- Require a higher minimum balance than a regular savings account
- Offer competitive interest rates
- Limit withdrawals to six per month (including checks or electronic transfers)
In real estate, money market accounts are often used by buyers to store down payment funds, emergency reserves, or savings set aside for closing costs. Lenders like to see funds in these accounts because they are considered liquid assets—money that’s available quickly and easily.
Borrowers may be asked to provide bank statements from their money market account during the loan approval process to verify available funds.
Why is Money Market Account Important in Real Estate Transactions?
Money market accounts are important because they help buyers show financial readiness. Lenders look for accessible and stable funds to ensure the buyer can cover upfront costs. For sellers, working with a buyer who has documented assets in a money market account can give confidence that the sale will move forward without financial delays. These accounts provide security and flexibility during the home-buying process.