One of the largest investments most people make is in their homes First time homebuyers in South Dakota can tap guidance for the home buying and borrowing processes from the state housing development authority. The state offers eligible homebuyers financial assistance and low-interest fixed rate mortgage loans for purchasing first homes. This step-by-step guide to getting a mortgage in South Dakota explores options available to homeowners with a variety of needs.


Check Mortgage Rates in South Dakota

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Mortgage rates vary by state partly due to state law as well as market forces competition among lenders, foreclosure rates and laws in South Dakota, along with the cost of doing business in the state all play into mortgage rates. Click here to find a centralized explanation of what drives rates in general.


First-Timer? Get Homebuying Help in South Dakota

Along with the traditional homebuying assistance offered nationally, such as loans through the Federal Housing Administration (FHA) and the Veterans Administration, South Dakota has its own program for first-time buyers. For qualified buyers, this program provides low-interest, fixed-rate mortgage loans and cash assistance for homebuyers purchasing their first home. Currently, select lenders are able to offer homebuyers the South Dakota Housing Development Authority's Fixed Rate Plus loan. There is a potential downside: participating in the program might trigger a higher mortgage rate.

Other home buying help from the state include free home buying classes and, in certain eligible areas in South Dakota, zero down payment loans through the USDA.

In addition, South Dakota homebuyers can save money monthly using the Mortgage Credit Certificate tax credit program. This program reduces the amount of federal withholding from your paycheck to free up funds for a mortgage payment. And certain areas of the state have county and city community-focused financial assistance programs that help low to moderate-income residents purchase a first home. For more on the home buying process in general, take a look at MoneyGeek's first-time buyers guide.

Financial Assistance in South Dakota for First-Time Buyers

Check here to see what you qualify for and how you can get financial assistance buying your first home in South Dakota.

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Understanding Home Affordability in South Dakota

Location, interest rates, the local economy and unemployment rates are some of the primary factors that affect home prices and affordability. Houses cost more in some, usually popular, areas. When mortgage rates are low, homebuyers can afford a pricier home because the monthly payments are lower than when rates are high. If the local economy is healthy, the local real estate market is healthy, but if the economy is waning, home sales tend to be affected negatively as well. Unemployment rates are tied into the local economy, which in turn can affect the housing market. South Dakota tends to have a very low unemployment rate compared to the national average. As homebuyers calculate how much mortgage they can afford, they need to factor in their individual employment, ongoing employment prospects, how much debt they have compared to how much they earn (the 'debt to income' ration); and what their financial situations will look like both short and long term.

How South Dakota Mortgage Rates and Home Prices Affect Monthly Payments

Metro Area Estimated Monthly Mortgage Payment* Q3 2019 (Change from Previous Year) 2018 Median Home Price 2017 2016
Sioux Falls $835 $225,600 (+7.5%) $209,300 $194,400 $185,800

Source: National Association of Realtors Q3 2019 Metropolitan Median Area Prices and Affordability report.
*Estimated Monthly Mortgage Payment is based on median home prices for the metro area in Q3 2019, a 20 percent down payment and a 30-year fixed mortgage at 3.75 percent. Figure reflects principal and interest but excludes insurance and property taxes.


Determine How Much You Can Borrow in South Dakota

Both conventional and Federal Housing Administration (FHA) loans have a maximum amount that can be borrowed. FHA has a maximum limit because they insure the loan. In the event a borrower is unable to repay the loan, FHA takes on the debt repayment. Conventional loans are not guaranteed or insured by the federal government. Conventional loans follow the guidelines of government-sponsored enterprises such as Fannie Mae or Freddie Mac. Both FHA and conventional loans have limits due to the potential loss should a borrower default. Check the table below for the limits in South Dakota, which can vary from county to county.

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Buying a Home in South Dakota: An Expert Weighs In


Todd Valland is a branch manager for Wells Fargo Home Mortgage in Sioux Falls.


Scott E. Bice is director of the Denver Homeownership Center.

How is the housing market in South Dakota now after the mortgage crisis? Is the market healthy in the major cities?


All the major cities in South Dakota have grown and have very steady job markets and very steady housing. I would estimate that the Sioux Falls economy has seen 5 percent annual growth in recent years. Sioux Falls and surrounding cities are a regional hub for medical care, the finance industry, and commercial construction, driving strong job markets in those areas. Unemployment is very low.

Home values in South Dakota have been increasing 4 percent to 6 percent a year, which is a typical trend, for lower and moderately priced homes. Values of higher-priced homes, such as those over $400,000, have not changed as much, and more expensive homes are staying on the market longer. There is plenty of land available and lots of new home construction.


The old peak in housing prices was 2008 — in the past two years some areas are now 30 percent above that previous 2008 peak. Incomes have risen for FHA borrowers and FHA has served first-time homebuyers well, especially in the years that FNMA and FHLMC were first placed into conservatorship. In general, the housing market has rebounded well from the 2008 low.

What do first-time homebuyers need to know about buying a home in South Dakota?


First-time homebuyers should know that programs are available to address many of the perceived barriers to homeownership for those who are financially ready to buy. Many people assume they need to have a very high credit score, high income, or enough cash for a 20 percent down payment to buy a home, but may not be true. Aspiring homeowners should talk to a lender to find out what options may be available to them. Rural lending programs through the USDA Rural Development programs, are popular here.


First-time homebuyers need to focus on their own finances first. It is always advisable to consider attending a housing counseling program to gain a true understanding of not only the costs to close on a home but the upkeep of a home. A first time homebuyer needs to get pre-approved for a mortgage, not just pre-qualified, to make an offer on a house. With all the credit overlays lenders place on loans and the higher costs to maximum financing, FHA programs remain one of the least expensive ways to obtain a home loan.


Don't Forget South Dakota Closing Costs

Closing costs vary by state due to different policies and rates. For example, South Dakota has a state standard mortgage recording fee of $30 for the first 50 pages compared to North Dakota's standard fee of $10 for first page and $3 a page thereafter. Additional closing costs include fees for a credit report, appraisal, survey, title insurance, and other documents. Average total closing costs in South Dakota ($1759) are about five percent less than the national average ($1847) and four percent less than its sister state, North Dakota ($1836), according to a 2015 Bankrate survey. (Bankrate's survey reflects minimal third party costs such as credit report and appraisal fees.) Lender origination fees were just slightly higher than national average while third-party fees were almost 13 percent lower. The state with the highest costs was Hawaii ($2163), followed by New Jersey ($2094) and Connecticut ($2033). The states with the lowest costs were: Ohio ($1613), Wyoming ($1689) and Utah ($1697). Here's a full explanation of closing costs and what you should expect.

Average Closing Costs in South Dakota

Average Origination
Average Third-Party
Average Total Closing

Source: Bankrate's 2015 survey of closing costs.

Refinancing a Mortgage in South Dakota

Refinancing can make sense if there is a drop in rates after you purchase your home. Take into consideration closing fees or prepayment penalties to calculate how much you will actually gain by refinancing. Some people refinance to get a lower rate, take cash out, or perhaps change the repayment terms (length) of the loan.

Nationwide, refinancing volume rose 26 percent from 2014 to 2015 due to lower rates and rebounding home values. In South Dakota alone, homeowners who refinanced in 2015 totaled 9,528.

Todd Valland, spokesperson for Wells Fargo Home Mortgage in Sioux Falls, SD, said that refinance activity in South Dakota is healthy as interest rates are still historically low.

"The trend we see in South Dakota is that many homeowners who refinance are doing it not just to save money with a lower rate but to shorten their mortgage term from 30 or 20 years to 15 years. They want to pay off the home sooner, perhaps before they retire," he wrote in an online interview. "Many homeowners here also have a lot of equity in their homes (the population trends older, so they have owned their homes longer), and cash-out refinancing or home equity lines of credit are often used to fund home improvements and remodeling."

The rise in equity of South Dakota's home values might explain why only less than one percent of refinancing loans in the state were through HARP (Home Affordable Refinance Program)., which helps troubled homeowners hold on to their homes. Click here to get a more comprehensive overview of mortgage refinancing and the necessary tools to determine if refinancing makes sense for you.

Other South Dakota Mortgage Resources

South Dakota Housing Development Authority

offers financial resources, information and tools to help residents with the home buying process.

U.S. Department of Housing and Urban Development

offers homeownership assistance at both city and statewide levels in South Dakota.

Grow South Dakota

offers financial assistance, homebuyer educational classes, weatherization assistance and more.

Homes Are Possible, Inc. (HAPI)

offers low to moderate income households financial assistance, educational programs and resources to secure housing in South Dakota.

Habitat for Humanity

can offer housing assistance for select individuals who demonstrate the need for a home, ability to pay a mortgage and willingness to partner in the construction in their home.

First Home Advisor

offers educational resources and financial information about buying your first home in South Dakota.