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2022 South Dakota First-Time Homebuyer Programs

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South Dakotans who are first-time homebuyers can receive down payment and closing cost assistance from state and local programs, as well as deals on mortgages and reduced home prices in selected areas. You’ll need to meet specific requirements on income limits, where the home is located and how long you need to live in it. Some programs will require you to pay back the assistance when you sell or refinance.

This overview will help you decide which program is best for you.

South Dakota statewide and local first-time homebuyer programs

First-time homebuyers in South Dakota whose income falls within the limits set by the programs and who meet all other requirements can receive homebuying assistance in several ways, from state and local programs. Here is a quick snapshot of assistance available throughout South Dakota.

Program name Assistance amountAssistance typeWhere it’s available
South Dakota Housing Development Authority (SDHDA) First-time Home Buyer ProgramUp to $300,000 mortgage loan Low interest fixed-rate mortgage for purchasing or building a homeAll counties and cities in South Dakota
SDHDA’s Fixed Rate Plus loan Down Payment Assistance3% or 5% of SDHDA’s Fixed Rate Plus loan Nonforgivable second mortgageAll counties and cities in South Dakota
Homes Are Possible Inc. (HAPI) Housing Assistance$20,000 or $30,000 on selected properties Silent second mortgageBeadle, Brown, Buffalo, Campbell, Clark, Codington, Day, Deuel, Davision, Deuel, Edmunds, Faulk, Grant, Hand, Hughes, Hyde, Jerauld, Marshall, McPherson, Potter, Roberts, Spink, Stanley, Sully and Walworth counties
HAPI Down Payment/Closing Cost Loan$5,000 on selected propertiesNonforgivable loanBeadle, Brown, Buffalo, Campbell, Clark, Codington, Day, Deuel, Davision, Deuel, Edmunds, Faulk, Grant, Hand, Hughes, Hyde, Jerauld, Marshall, McPherson, Potter, Roberts, Spink, Stanley, Sully and Walworth counties
GROW South Dakota Down Payment and Closing Cost Assistance$5,000-$10,500, depending on funding availabilityNonforgivable second mortgage All counties and cities in South Dakota

What to know about different types of down payment assistance

Receiving down payment assistance (DPA) is not just a matter of receiving financial help and saying “thank you.” Programs may have requirements about whether you need to pay the money you receive back, including what types of events trigger repayment and when. These requirements depend very much on the type of assistance you receive. Here’s a brief look at the various types.

Second mortgage. If you receive a second mortgage, a second lien (in addition to the primary, or first, mortgage) is placed against the home. Be sure to check into the terms of a second loan or mortgage, because when they are used for financial assistance, often no interest is due and no monthly payments are required. (That’s why they’re sometimes referred to as “silent” loans.) But many do need to be paid eventually, so be sure to check on if that will happen (and when). It’s usually when the home is sold or refinanced, or when the mortgage is paid off.Some second loans are forgivable. If you have a forgivable second loan, any obligation to repay is eliminated once the forgiveness terms are met. This could be living in the home for a specific time frame.

Grant. A grant is effectively free money, because there are no repayment requirements. You do, however, need to be aware of specific qualifying requirements to receive a grant, like income limits.

How South Dakota first-time homebuyer programs work

LendingTree assessed South Dakota’s first-time homebuyer assistance programs to develop the list of programs here. It’s prudent to touch base with the housing authorities and organizations, though, to make sure funding is still available. The steps below are required as a piece of the approval process for nearly all homebuyer assistance programs in South Dakota.

Finishing the required homebuyer education.Most South Dakota assistance programs mandate that homebuyers take courses in homebuyer education. The seminars are designed to ensure that homebuyers understand what homeownership requires, as well as the advantages and potential drawbacks of home ownership.

Obtaining a mortgage approval from an approved lender.Programs usually typically work with approved mortgage lenders, so you’ll need to work with those lenders to obtain mortgage approval to get the assistance. Check into the financial requirements for individual lenders, because they may be stiffer than for mortgages not tied to financial help. If you’ve had issues with poor credit or debt in the past that could affect your credit score or ability to pay, you can make an appointment with the lender’s loan officer to discuss any available options.

Know the program’s income limits.These programs are designed to help low to moderate income people, so all feature income limit criteria. Check into these for the program you’re interested in, because South Dakota limits depend on the area’s median income, county, family size and other criteria. Check out the program’s website to determine the current income limits.

Determine the requirements for paying the assistance back.If you receive a second mortgage or loan, it may need to be paid back when specific events happen, such as selling the home or refinancing the first mortgage. Given the variability in payback requirements, you don’t want to be shocked to find out a payback schedule you weren’t expecting. Find out before you take on the mortgage.

Be aware of interest rate requirements.Some programs may offer lower interest rates than those in regular loan programs, while others may charge higher interest rates in exchange for increased risk. The interest rate affects how much you’ll pay every month.

South Dakota first-time homebuyer program requirements

Each assistance program for first-time homebuyers has multiple steps, so it’s a good idea to find out the requirements before you start applying. They can be stiffer than those involved in regular mortgages. The data below can help you determine which programs you can apply for.

Program name Credit score minimumDTI ratio maximumMaximum income limitHow long you have to live in home
SDHDA First-time Home Buyer ProgramContact participating lenderContact participating lenderRange between $75,500 and $110,745, depending on county of residence and family size Information not available
SDHDA’s Fixed Rate Plus loanContact participating lender Contact participating lenderRange between $75,500 and $110,745, depending on county of residence and family sizeInformation not available
HAPI Down Payment/Closing Cost LoanNo requirementNo requirement80% of area median income in county; range between $39,300 and $101,750, depending on county and number of people contributing incomeInformation not available
HAPI Housing AssistanceNo requirement No requirement80% of area median income in county; range between $39,300 and $101,750, depending on county and number of people contributing incomeNo requirement
GROW South Dakota Down Payment and Closing Cost AssistanceContact lenderContact lender80% of average median income for the countyInformation not available

THINGS YOU SHOULD KNOW

The best approach is likely to review the individual program limits vis-à-vis your situation first, so you don’t begin applying only to find out your income is too high to qualify, or your credit score doesn’t make the grade. Income limits aren’t one size fits all; the median area income and family size all matter.

The U.S. Department of Housing and Urban Development (HUD) website provides a lookup tool to check South Dakota income limits by county, as well as reviewing the information above.

National first-time homebuyer programs

For most South Dakota first-time homebuyer programs, you’ll need to be approved for a mortgage first. The following programs can all be used by first-time homebuyers, although they aren’t limited to only first-time buyers.

Conventional loans. Conventional mortgages aren’t secured by any government agency. As a result, their requirements may be stiffer and their loan limits higher than the government-insured programs below. The Fannie Mae HomeReady® and Freddie Mac Home Possible® programs offer mortgage insurance premiums lower than FHA loans for qualified buyers.

FHA loans. The Federal Housing Administration (FHA) backs loans for borrowers whose credit scores may be lower and debt-to-income ratios may be higher than conventional lender requirements. However, you’ll need to be aware of FHA loan limits. FHA loans also require FHA mortgage insurance.

VA loans. The U.S. Department of Veterans Affairs (VA) guarantees VA loans for veterans and actively serving military. VA loans don’t usually require down payments or mortgage insurance, and there are also no loan limits, making them one of the most flexible government programs. They do have closing costs, which DPA funds can be used for.

USDA loans. Mortgages backed by the U.S. Department of Agriculture (USDA) can be used by folks with low to moderate income in rural areas and suburban areas with low density. No down payment is required. You can use DPA funds toward the closing costs for a USDA loan.

FAQs about South Dakota’s first-time homebuyer programs

Who qualifies as a first-time homebuyer in South Dakota?

Most programs in South Dakota consider you a first-time homebuyer if you didn’t own a home for the last three years, following HUD’s definition.

For the assistance offered by SDHDA, if you owned a mobile home during the past three years, it does not count as home ownership.

Can I qualify for DPA in South Dakota?

You can qualify for DPA programs in the state as long as you meet the income and credit requirements, and there are funds still available in the program.

How much of a down payment do I need to buy a house in South Dakota?

If you meet the criteria for a USDA or VA loan, you won’t have to come up with a down payment at all. For a conventional loan, first-time homebuyers must pay at least 3% down. The FHA down payment minimum requirement is 3.5%.

Home price trends in South Dakota’s major areas

South Dakota has not been immune to the general climb in home prices across the U.S. The largest city, Sioux Falls, spreads across two counties. In both Minnehaha County and Lincoln County, home prices rose 18.1% year-over-year in the fourth quarter of 2021. Prices in Lincoln County are a bit higher overall, with the median home value at $285,505, versus Minnehaha County’s $269,782. The average monthly mortgage payment in Lincoln County is $1,094 versus $895 a year prior. In Minnehaha County, the average mortgage payment is $1,034 versus $846 a year earlier.

In Pennington County, which includes South Dakota’s second-largest town, Rapid City, prices rose 23.9% year-over-year, to $265,664. The average mortgage payment on a 30-year loan in Pennington County is $1,018, versus $794 the year prior.

 

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