Assistance Programs For A South Dakota First-Time Home Buyer

Are you planning to move to the Mount Rushmore state? If so, you're tapping into a wealth of opportunities – a relatively low cost of living, beautiful vistas, no state income tax and other major perks.

First-time home buyers have many options for buying a house, but as a South Dakota first-time home buyer, you may wonder about your options for purchasing a home in your state, including down payment assistance.

First-Time Home Buyer Options In South Dakota

We'll look at the programs and grants you can take advantage of in South Dakota, including the qualifications and benefits for each program, such as interest rates, closing cost assistance, eligibility, income limits and more.

SDHDA First-Time Home Buyer Program

The SDHDA South Dakota Housing First-Time Home Buyer Program offers fixed-rate mortgages and down payment assistance for South Dakota first-time home buyers. To qualify, you must:

• Not have owned a home in the previous 3 years (the house must have been permanently affixed to a foundation – mobile homes don't count).
• Have an income below the South Dakota housing income limits.
• Purchase a home for $385,000 or less.

Governor’s House Program

The Governor's House Program, another South Dakota first-time home buyer program, creates affordable housing for seniors, those with disabilities or who have low to moderate income. To qualify, you must live in South Dakota, and:

• Make $64,820 or less in a one- or two-person household or $74,080 or less in a three-person or larger household.
• Have a net worth of less than $125,000 (or $105,000 in liquid assets) if you are 61 or younger.
• Have a net worth of less than $250,000 (or $140,000 in liquid assets) if you are 62 or older.
• Live in the home as your only residence.

You must also secure a lot, permits, lay the foundation, hook up utilities and add flooring and appliances. Home costs include two-bedroom homes at $71,400 and three-bedroom homes at $85,400. Note that due to the current capacity, new house orders will not be delivered for over 3 years.

SD First-Time Home Buyer Down Payment And Closing Cost Assistance

You can also get down payment assistance and closing cost assistance in South Dakota. A down payment is the amount you put down for a home as a percentage of the price of the home. Down payments typically range from 3% – 20% of your purchase price.

Closing costs are the fees that buyers and sellers pay for the services of a real estate transaction – you pay them on closing day or they get added to the property's purchase price.

If you'll need assistance for these costs, let's look at the GROW, SDHDA and HAPI programs.

GROW South Dakota Down Payment And Closing Cost Assistance

The GROW South Dakota Down Payment And Closing Cost Assistance program provides between $5,000 – $10,000 assistance, which must be repaid when your home is refinanced, sold, when you stop being the primary owner or pay off the mortgage completely.

In addition to completing a home buyer education course and meeting income restrictions, you must purchase a:

• Single family to four-unit property
• Primary residence
• Property in South Dakota

Note that you may not be able to use this program in conjunction with other down payment assistance programs.

SDHDA Fixed Rate Plus Loan

The SDHDA Fixed Rate Plus Loan allows you to receive a 3% or 5% down payment and closing costs. Check with your lender to see if you qualify. You may also get a second mortgage at 0% interest rate, due-on-sale or satisfaction, no payments and no additional fees.

Homes Are Possible, Inc. (HAPI)

Homes Are Possible, Inc. (HAPI) is a private nonprofit organization that offers low- and moderate-income individuals a way to secure affordable housing. Through HAPI, you can get closing assistance of $5,000 in an interest-free loan. You must have a household income at or below HUD 80% AMI per county and household size, and complete a home buyer education course.

How To Apply To Programs As A South Dakota First-Time Home Buyer

How do you apply to programs as a first-time home buyer South Dakota resident? First, it's important to learn more about how much house you can afford and what exactly you need to know to qualify for a mortgage. Then, consider several loan types before you make your final decision. We'll discuss a few loan types below, including FHA, VA and USDA loans.

FHA Loans

FHA loans are an option for first-time home buyers in South Dakota. FHA loans come from your lender and are insured by the Federal Housing Administration (FHA). You can get a mortgage with a low 3.5% down payment if you have at least a 580 credit score. A down payment of 10% means your minimum required credit score could be as low as 500.

It's a great option for individuals with a lower credit score and not much saved for a down payment.

Here are some of the requirements needed to qualify for FHA loans:

• Debt-to-income ratio (DTI): DTI describes the relationship between the amount you have coming into your household relative to your debt. Mortgage payments should not exceed 38% of your monthly income, and total debt payments no more than 45%.
• Mortgage insurance premium (MIP): You'll pay an upfront mortgage insurance premium (MIP) of 1.75% and monthly MIP between 0.15% – 0.75%. Your lender will have more information about how much you'll pay.
• Closing costs: You'll pay between 3% – 6% of your loan amount in closing costs, and you may be able to lower or eliminate them by financing them into the loan, but you will likely pay a higher interest rate.
• Proof of income: You'll need to prove you have a steady income to qualify.
• Loan limits: You can't go over the loan limits of $498,257 in low-cost areas and $1,149,825 in high-cost areas.
• FHA appraisal: You'll also need to get an FHA appraisal and ensure the property meets HUD's safety guidelines.

Check with your lender for more information about FHA qualification requirements.

VA Loans

VA loans are also an option for first-time home buyers in South Dakota if they are qualifying veterans, members of the military or a surviving spouse of a veteran. You don't have a required down payment with VA loans, but you often must pay a funding fee between 1.25% – 3.3% of the loan value. You can also take advantage of low closing costs with a VA loan. To qualify for a VA, you must:

Be an active-duty service member, an honorably discharged veteran or a qualifying surviving spouse.

Have served 90 consecutive days of active service during wartime or 181 consecutive days during peacetime, or over 6 years in the National Guard or Selected Reserve, or at least 90 days under Title 32 and meet the eligibility requirements (as long as 30 of those are served consecutively).

Apply for a COE on the VA's website or contact your lender to receive one. The VA website contains more information about the COE application process.

Furthermore, service time requirements don't apply if you were discharged because of a service-based disability.

USDA Loans

USDA loans may also be a great option as a first-time home buyer in South Dakota. You can typically get a USDA loan with a minimum credit score of 640 and no down payment and you don't have to be a first-time home buyer to qualify. However, you'll have to purchase in a rural or suburban area and meet certain income limits. You'll pay a guarantee fee, a 1% upfront MIP fee and an annual 0.35% of the loan amount.

Buying A Home In South Dakota

South Dakota first-time home buyers should also consider any unique property rights and and/or homeownership quirks specific to the state of South Dakota before moving. Also, learn more about the best states to retire and best cities for young professionals if you're on the fence about moving to South Dakota.

It's worth looking into zoning restrictions established by the local government and how you can use your residence, restrictive covenants, property taxes and special assessments, easements (the right of one party to use another's land for a specific purpose), flood zone information for additional insurance and more.

Homes may also need to undergo certain safety inspections in some parts of the state. Ensure that the South Dakota Real Estate Commission licenses and regulates home inspectors.

SD First-Time Home Buyers: FAQs

Let's look at some frequently asked questions for first-time home buyers in South Dakota or answers to questions about first-time home buyer programs you may not have considered before.

What’s the minimum credit score needed to qualify for first-time buying assistance in South Dakota?

It's best to check about each program and loan because each has its own requirements. However, consider shooting for a minimum credit score of 620 for many first-time home buyer programs.

Can I get a first-time home buyer tax credit in South Dakota?

Is there a first-time home buyer tax credit in South Dakota?

Yes! The SDHDA Tax Credit offers a dollar-for-dollar tax bill reduction, reducing the federal income tax you pay. The remaining interest you pay is still eligible for the home mortgage interest deduction.

How do veterans take advantage of first-time home buyer assistance programs in South Dakota?

Is there a first-time veteran home buyer assistance program in South Dakota? Take a look at the VA loan program information that we mentioned above for details. They are available for veterans all over the country.

What if I’m a repeat buyer, are there programs for me?

Yes, you can take advantage of a program for repeat home buyers. The Repeat Homebuyer Loan Program offers a low fixed rate, down payment and closing cost assistance, reduced mortgage insurance and less paperwork. You can qualify with an income limit of less than $111,120 for a family of two or less and $129,640 for a family of three or more, a purchase price limit of $460,000 and minimum credit score of 620.

Do I need to take a class as a first-time home buyer in South Dakota?

A class is a possibility because programs want to ensure you understand the rules and requirements of homeownership. However, note that you likely won't have to sit at a desk with a pencil in hand – you can typically take an online class. Learn more about first-time home buyer classes in South Dakota.

The Bottom Line: There Are Many Options For South Dakota First-Time Home Buyers

The road to becoming a first-time home buyer in South Dakota doesn't have to be difficult. Whether you qualify for down payment assistance through a state-sponsored program or shoot for a different type of federal-backed loan, borrowers and current homeowners can find the right option, no matter their loan amount. Do your research to weigh the pros and cons of every program before you make a final decision but note that there are plenty of options in the Mount Rushmore state.

Start the approval process to see what you may qualify for before purchasing a home.