South Dakota First-Time Home Buying Assistance Programs & Grants for 2024
By Susan Guillory
(Last Updated – 03/2024)
The Mount Rushmore State saw a 6.8% increase in home prices from February 2023 to February 2024. South Dakota may appeal to both seasoned and first-time homebuyers in part because of its low cost of living compared to other parts of the country. And that appeal may be one reason why the number of homes sold was up 4.3% year over year. The median price in South Dakota is now $311,500, according to Redfin, a real estate brokerage that tracks trends.
You’ll need to have a game plan for buying a home in South Dakota. This home buying guide will show you state and federal payment assistance for the first-time homebuyer in South Dakota.
Recommended: First Time Homebuyer Guide
Who Is Considered a First-Time Homebuyer in South Dakota?
It might surprise you to know that the definition of a first-time homebuyer in South Dakota is someone who hasn’t owned a home over the past three years. You might be a first-time homebuyer without realizing it!
The U.S. Department of Housing and Urban Development (HUD) defines a first-time homebuyer as such, but includes:
• A single parent who has only owned a home with a partner while married
• A displaced homemaker who has only owned a home with a spouse
• Someone who has owned a principal residence not permanently affixed to a permanent foundation
• Someone who has only owned a property that wasn’t in compliance with state, local, or model building codes
Keep in mind that veterans and people buying in targeted areas often qualify for the same state perks as first-time buyers. Not sure where you want to settle in the state? Look at a list of the best affordable places to live in South Dakota.
5 South Dakota Housing Programs for First-Time Homebuyers
If you lack the money for a down payment or aren’t sure how you will afford a home mortgage loan, programs in the state may be able to provide assistance.
1. South Dakota Housing First-Time Homebuyer Program
The South Dakota Housing Development Authority has a first-time homebuyer program that provides low-interest, fixed-rate loans.
To qualify, you must meet household income and purchase price limits . The current price limit for first-time homebuyers is $385,000.
2. South Dakota Housing Down Payment Assistance
The agency also provides down payment and closing cost assistance in the form of a 0% interest, 30-year second mortgage, due upon the sale of the property or satisfaction of the first mortgage. Borrowers receive 3% or 5% of the purchase price in assistance.
3. Grow South Dakota Home Mortgage Lending
Grow South Dakota also offers home mortgages for new or existing homes in South Dakota. Loans are available for up to $300,000.
4. Grow South Dakota Down Payment/Closing Cost Assistance
Grow South Dakota also provides down payment and closing cost assistance in an amount from $5,000 to $10,500. This comes in the form of a no-interest deferred loan.
5. Homes Are Possible Closing Cost Assistance
Another organization that provides closing cost assistance is Homes Are Possible, Inc. in Northeast South Dakota. HAPI sells first-generation, move-in-ready homes and offers a non-interest-bearing second mortgage of $20,000 to $30,000 to help make ownership possible.
How to Apply to South Dakota Programs for First-Time Homebuyers
As you explore different types of mortgage loans and first-time homebuyer programs, make a list of qualifications and requirements. Then, when you’ve chosen the best first-time homebuyer program, you’ll be prepared to apply.
For South Dakota Housing Development Authority programs, contact one or more participating lenders .
To qualify for Grow South Dakota assistance, you will need a fully executed purchase agreement and approval letter from an approved first mortgage lender. Start your application by creating an account
Recommended: Understanding Mortgage Basics
Federal Programs for First-Time Homebuyers
Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, like state programs, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.
The mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes.
Federal Housing Administration (FHA) Loans
The FHA, which is part of the U.S. Department of Housing and Urban Development (HUD), insures mortgages for borrowers with lower credit scores. Homebuyers choose from a list of approved lenders that participate in the FHA loan program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers, who typically need FICO® credit scores of 580 or higher. Those with scores as low as 500 must put at least 10% down.
In addition to examining your credit score, lenders will look at your debt-to-income ratio (DTI, your monthly debt payments compared with your monthly gross income). FHA loans allow a DTI ratio of up to 50% in some cases, vs. a typical 45% maximum for a conventional loan.
Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.
FHA loans always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years. For a $300,000 mortgage balance, upfront MIP would be around $5,250 and monthly MIP, at a rate of 0.55%, would be around $137. You can learn more about these loans, including FHA loans for refinance and rehab of properties, by reading up on FHA requirements, loan limits, and rates.
Freddie Mac Home Possible Mortgages
Very low- and low-income borrowers may make a 3% down payment on a Home Possible® mortgage. These loans allow various sources for down payments, including co-borrowers, family gifts, employer assistance, secondary financing, and sweat equity.
The Home Possible mortgage is for buyers who have a credit score of at least 660.
Once you pay 20% of your loan, the Home Possible mortgage insurance will be canceled, which will lower your mortgage payments.
Fannie Mae HomeReady Mortgages
Fannie Mae HomeReady® Mortgages allow down payments as low as 3% for low-income borrowers. Applicants generally need a credit score of at least 620; pricing may be better for credit scores of 680 and above. Like the Freddie Mac program, HomeReady loans allow flexibility for down payment financing, such as gifts and grants.
For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site .
Fannie Mae Standard 97 LTV Loan
The conventional 97 LTV loan is for first-time homebuyers of any income level who have a credit score of at least 620 and meet debt-to-income criteria. The 97% loan-to-value mortgage requires 3% down. Borrowers can get down payment and closing cost assistance from third-party sources.
Department of Veterans Affairs (VA) Loans
Active-duty members of the military, veterans, and eligible family members may apply for loans backed by the Department of Veterans Affairs. VA loans, which can be used to buy, build, or improve homes, have lower interest rates than most other mortgages and don’t require a down payment. Most borrowers pay a one-time funding fee that can be rolled into the mortgage.
Another benefit of VA loans is that they do not require private mortgage insurance (PMI) for borrowers who make a down payment of less than 20%. And they have more flexible credit score requirements. In some cases, even those who have previously been in foreclosure or bankruptcy can qualify.
Borrowers applying for a VA loan will need a Certificate of Eligibility from the VA so make sure to review a guide to qualifying for a VA loan as a first step in the process.
Native American Veteran Direct Loans (NADLs)
Eligible Native American veterans and their spouses may use these no-down-payment loans to buy, improve, or build a home on federal trust land. Unlike VA loans listed above, the Department of Veterans Affairs is the mortgage lender on NADLs. The VA requires no mortgage insurance, but it does charge a funding fee.
US Department of Agriculture (USDA) Loans
No down payment is required on these loans to moderate-income borrowers that are guaranteed by the USDA in specified rural areas. Borrowers pay an upfront guarantee fee and an annual fee that serves as mortgage insurance.
The USDA also directly issues loans to low- and very low-income people. For loan basics and income and property eligibility, head to this USDA site .
HUD Good Neighbor Next Door Program
This program helps police officers, firefighters, emergency medical technicians, and teachers qualify for mortgages in the areas they serve. Borrowers can receive 50% off a home in what HUD calls a “revitalization area.” They must live in the home for at least three years.
Reach the HUD Sioux Falls Field Office at 605-330-4223.
First-Time Homebuyer Stats for 2024
• Median home sale price in South Dakota: $311,500
• 3% down payment: $9,345
• 20% down payment: $62,300
• Percentage of buyers nationwide who are first-time buyers: 32%
• Median age of first-time homebuyers: 35
• Average credit score (vs. average U.S. score of 714): 734
Financing Tips for First-Time Homebuyers
In addition to federal and state government-sponsored lending programs, there are other financial strategies that may help you become a homeowner. Some examples:
• Traditional IRA withdrawals. The IRS allows qualifying first-time homebuyers a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. The IRS considers anyone who has not owned a primary residence in the past three years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may jeopardize your retirement savings.
• Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years. You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, homebuyers will pay income tax on earnings withdrawn.
• 401(k) loans. If your employer allows borrowing from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 years to repay.
• State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.
• The mortgage credit certificate program. First-time homeowners and those who buy in targeted areas can claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction. To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. If you refinance, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back. There are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.
• Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.
• Your lender. Always ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.
Finally, here’s a home affordability calculator that can help you determine how much house you might be able to afford.
The Takeaway
Income-qualified first-time homebuyers in South Dakota have options to help them pay for a home. Other first-time buyers can explore the wide world of mortgages on their own to find the right fit.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.FAQ
Should I take first-time homebuyer classes?
You’ll have to take one if you are enrolled in certain first-time homebuyer programs. And even if you aren’t, it can’t hurt to be more informed about the complex process of buying and financing a home.
Do first-time homebuyers with bad credit qualify for homeownership assistance?
Often they do. Many government and nonprofit homeowner assistance programs are available to people with low credit scores. And often, interest rates and other loan pricing are competitive with those of loans available to borrowers with higher credit scores. That said, almost any lending program has credit qualifications.
Is there a first-time homebuyer tax credit in South Dakota?
Yes. There is a mortgage credit certificate program for first-time homebuyers and those who buy in targeted areas in South Dakota. With it, you can claim a portion of your mortgage interest as a tax credit, up to $2,000.
The fee to acquire a South Dakota Housing Development Authority tax credit is $750, reduced to $250 if the mortgage certificate is used with the agency’s first-time homebuyer program. Participating lenders may also charge a fee up to $250.
Is there a first-time veteran homebuyer assistance program in South Dakota?
South Dakota Housing advises applicants to ask their lender about its veterans waiver to see if they qualify for the mortgage and down payment programs.
The U.S. Department of Veterans Affairs also offers home loans to service members, veterans, and eligible surviving spouses.
What credit score do I need for first-time homebuyer assistance in South Dakota?
A minimum score of 620 will help in getting a mortgage through the South Dakota Housing Development Authority.
Credit score requirements vary, depending on the assistance program and the lender.
What is the average age of first-time homebuyers in South Dakota?
If South Dakotans are anything like the nationwide median, they’re 35.
Photo credit: iStock/DenisTangneyJr
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances. Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice. SOHL0224047