Can a Side Hustle Really Help You Save Up Money to Buy a House?
- Author: Noah Koch
- Posted: 2024-07-06
In these uncertain times, "side hustles" are an increasingly common way of making money. A side hustle is a secondary job that you take on to make a little extra money outside of your normal job. Side hustles can range from things like tutoring high schoolers to working a part-time job at your local Walmart. In theory, a side hustle can be an excellent way to save for a down payment. However, this type of employment isn't always as helpful as it might sound. Before you decide to use a side hustle to pay for your home, there are a few things you should know.
A Single Income Usually Isn't Enough for a Down Payment Anymore
Is a side hustle really necessary? Unless you're lucky enough to have a very high-paying job, it probably is. Data from the U.S. Bureau of Labor Statistics reveals that the average American might not be making enough to save a down payment. On average, people spend $67,000 a year on basic living expenses, but the average annual salary is just $79,000. Of course, many people are making far less than average though, and medical expenses and other emergencies can eat away at savings. In many cases, a side hustle can be the only way to actually get enough savings for a down payment.
Certain Side Hustles Are More Lucrative Than Others
Keep in mind that all side hustles aren't equal. If you're thinking about using a side hustle to pay for your down payment, you need to plan carefully. Take the time to fully research the job option and see whether it's right for you. The highest-paying options tend to be ones that monetize a special skill you have. Grant writing, freelance coding, running online shops, and part-time bookkeeping can all bring in a lot of money. You can also make a lot if you're willing to work hard. Things like cleaning homes or performing lawn care can help you save for your down payment.
Some Side Hustles Can Actually Cost You Money
Not all side hustles are worth the effort. If you want to actually meet your down payment savings goals, you need to avoid certain jobs. First of all, make sure your side hustle isn't a scam such as a multi-level marketing business. If you have to pay a lot of money to start the job, it's not worth it. Don't forget that certain side hustles can have hidden costs as well. If you only make a few hundred dollars on Uber but spend a bunch of money on gas and car repairs, you might not break even. Your time is too valuable to waste too. If your priority is saving for a down payment as soon as possible, avoid time-consuming side hustles that are unlikely to bring in money such as trying to become an influencer.
A Side Hustle Can Be a Valuable Backup
Side hustles might seem like a lot of effort for just a small amount of savings, but they're worth it in times of uncertainty. Many people are on track to buy a home in a few years, but an issue like a layoff or sudden hike in apartment prices destroys their plans. This is when a side hustle can be extremely useful. Since you have multiple streams of income, all your money won't disappear if your main job doesn't work out. Additionally, having extra savings can protect you from having to dip into funds for a down payment if you have sudden expenses.
Having a Side Hustle Might Make Your Mortgage Application Longer
As long as you pick the right side hustle, it's one of the best ways to shorten the amount of time you have to save for your down payment. However, it's important to recognize that it can require a little extra paperwork when you apply for your mortgage. During the mortgage application, the lender will closely examine your finances. If your side hustle is freelance work, they might require extra documentation about where you get your money and how much you earn. This usually just means a few extra minutes of work for you, but to avoid derailing the process, make sure to document all expenses and earnings from any freelance business carefully.
