Home prices have climbed across the board in the last year, but the housing market in South Dakota managed to keep those soaring costs in check. Home values in The Mount Rushmore State increased by more than 6 percent in the past year — a smaller uptick than the nationwide trend, according to Zillow.
Still, if you’re a first-time homebuyer, you might need some help to come up with the necessary cash to stop renting and start owning. One of the best places to turn is the South Dakota Housing Development Authority, which has been helping to make homeownership more affordable since 1973 with programs that work in conjunction with conventional, FHA, VA and USDA loans.
South Dakota first-time homebuyer loan programs
SDHDA First-Time Homebuyer Program
The South Dakota Housing Development Authority’s (SDHDA) first-time homebuyer program is called, fittingly, the First-Time Homebuyer Program. However, this doesn’t have to actually be your first time purchasing a property — you simply can’t have owned a home in the last three years.
If that description fits you, you’ll need to satisfy a few other conditions to qualify for a loan with a competitive interest rate:
- Minimum credit score of 620
- A gross household income under a certain limit, which varies based on the size of your household and where you want to live ($77,800 to $110,170)
- Complete a homebuyer education course online or in-person
There are a few conditions that the property you’re buying or building will need to satisfy, too:
- Cost no more than $275,000
- If it’s a manufactured or mobile home, it must be on a permanent foundation
South Dakota down payment assistance
SDHDA Fixed Rate Plus
If you’re concerned about coming up with the initial money to put down for your first home, the SDHDA offers a second loan worth up to 3 percent of your first mortgage. The Fixed Rate Plus assistance is a zero-percent 30-year loan, so you won’t pay any additional interest or fees. The amount is due after 30 years or whenever you pay off your first mortgage, whichever arrives sooner.
Other South Dakota homebuyer assistance programs
SDHDA Tax Credit
In addition to the absence of a statewide personal income tax for South Dakota residents, the state has another potential tax perk for first-time homebuyers: a mortgage credit certificate (MCC). With an MCC, a portion of your mortgage interest can be used as a dollar-for-dollar tax credit, which lowers your overall tax bill and keeps extra money in your bank account.
If the home you’re buying in South Dakota costs less than $275,000, here’s a rundown of the tax credit you could be eligible for, based on the amount of your mortgage. The credits run from 30 percent to 50 percent, up to $2,000 per year:
- $120,000 or less: A tax credit of 50 percent of your mortgage interest
- $120,001 to $150,000: A tax credit of 40 percent of your mortgage interest
- More than $150,000: A tax credit of 30 percent of your mortgage interest
Qualifying for this tax credit does come with costs. The MCC program comes with a standard fee of $750, but if you’re taking advantage of the SDHDA’s First-Time Homebuyer Program, you’re in luck: Your fee is reduced to $250. Be sure to ask your mortgage lender if they charge an additional $250 fee, too.
Regardless of how much you pay upfront, though, this credit can create meaningful savings over a 30-year period.
Local homebuyer assistance programs
In addition to assistance from SDHDA, there are other ways to make buying a home in South Dakota easier.
The nonprofit GROW South Dakota, for example, has a down payment assistance program that can help qualified buyers receive loans between $5,000 and $10,500 for their upfront costs.
If you’re buying outside of Brown County, you might be eligible for the $4,000 grant program from the nonprofit Homes Are Possible, Inc. for help with your down payment. If you’re planning to buy in Brown County, the organization might still be able to help you, but you’ll eventually need to pay back the $4,000.
Other first-time homebuyer loan programs
Be sure to refer to Bankrate’s guide to first-time homebuyer loans and programs to find out if you qualify for nationally-available support, as well.
For other South Dakota homeownership programs, including by city or county, visit HUD.gov.
Ready to start your homebuying journey in South Dakota? First, use the state housing finance authority’s first-time homebuyer calculator, which can help you determine your eligibility. Then, you can connect with one of the agency’s many participating banks, credit unions or mortgage lenders to get the loan process started. Remember that interest rates and terms will not be the same across all institutions, so be sure to compare multiple options to find the best offer that fits your needs.
Nearby states first-time homebuyer programs
- North Dakota first-time homebuyer programs
- Montana first-time homebuyer programs
- Wyoming first-time homebuyer programs
- Nebraska first-time homebuyer programs
- Iowa first-time homebuyer programs
- Minnesota first-time homebuyer programs
- First-time homebuyer programs by state
- Top tips for first-time homebuyers
- Avoid common first-time homebuyer mistakes
- 6 steps to finding the best mortgage lender
- Mortgages that require no down payment or a small one
- What is the minimum down payment for a house?