Here's How a Side Gig Can Help You Afford a Home

Imagine bringing home extra money that isn't already earmarked for bills.

Life just keeps on getting more expensive, and buying a home is no exception. According to the Federal Reserve Bank of St. Louis, the median sale price of a home in the United States was $467,700 in the fourth quarter of 2022. And just to add insult to injury, Americans are also paying much higher mortgage rates than they were during 2020 and 2021. As of this writing, Freddie Mac notes the average interest rate on a 30-year fixed-rate mortgage loan is 6.65%.

What does this mean for you? If you want to buy a house, you can likely expect to put more money down, and also make higher mortgage payments thanks to those higher rates. This certainly isn't a cheerful state of affairs, but if it seems like buying a home will be impossible for you due to the cost, consider whether you can get a side hustle. Here's why it's worth thinking about.

A side hustle can help

There are a lot of great reasons to get a side gig, such as paying off debt, building job skills, or even just having something fun to do that also makes you money. But putting yourself into a better financial position to buy a home is definitely a worthy cause.

Extra down payment funds

Let's say that in your area, you can expect to pay $400,000 for a home. The recommended down payment for a home being purchased with a conventional mortgage loan is 20%, which comes to $80,000 on this home. That is certainly a lot of money, but if you make a down payment of less than 20%, you'll have to pay private mortgage insurance until you reach 20% equity in the home, so yet another cost to handle.

If saving that $80,000 sounds daunting, know that 20% down isn't a hard-and-fast requirement to buy a home. But the more you can put down, the less time you'll have to pay PMI, and you might also qualify for a better mortgage rate than if you put down the bare minimum (which could be as low as 3% for a conventional mortgage, if you have good credit).

Cash savings for other expenses

The costs of owning a home don't end with the down payment and your monthly mortgage payment. You'll also be responsible for paying closing costs, property taxes, maintenance, and more. Wouldn't it be nice to go into a home purchase with a pot of money saved up to help you handle these expenses, not all of which can be planned for? A side hustle can help.

Money for debt payoff

If your side gig really takes off, you might consider dedicating some of that money to paying off debt. What does this have to do with affording a home? Quite a bit, actually. If you can pay off some or all of your other debt, you'll free up more cash to go toward housing expenses and show your lender a lower debt-to-income ratio, which might make it easier to get approved for a mortgage. Plus, your credit score will improve as well, and you could qualify for a lower interest rate, shrinking your monthly mortgage payments.

A side hustle doesn’t have to last forever

Any way you slice it, a side hustle can do great things for your finances, especially if you're hoping to buy a home. And if you can put yourself into a better position to buy, say by putting aside more money for a down payment and other costs, and paying down your debt, you don't have to keep that job forever. Sometimes a side gig is just a means to an end, and getting to buy a home might be the end you're dreaming of.