First-Time Homebuyer Programs in South Dakota

The down payment on a new home often poses the biggest hurdle for first-time homebuyers. In South Dakota, where the average home value is $307,799, a down payment of $61,560 is required to avoid private mortgage insurance.

Fortunately, first-time homebuyer programs in South Dakota can help you achieve homeownership. There are also mortgages that allow first-time homebuyers to put less down on a home, though these usually have income requirements and require mortgage insurance. MoneyGeek explores several state-specific and government-backed first-time homebuyer programs for people from different financial backgrounds.

South Dakota offers grants and loans to assist first-time homebuyers with both down payment and closing costs. We have compiled the first-time homebuyer programs the South Dakota Housing Development Authority (SDHDA) offers to help you find the best option for your particular needs and situation.

The First-Time Homebuyer Program by SD Housing provides affordable loans and mortgage options for first-time buyers with competitive rates and down payment assistance. The program covers both existing and new construction homes and various loan types, including FHA, VA, USDA and conventional. It also permits co-signers and offers a maximum purchase price cap to help ensure affordability.

The Tax Credit program by SD Housing offers first-time homebuyers a Mortgage Credit Certificate (MCC) to help reduce federal income tax obligations. It provides a dollar-for-dollar tax reduction on a percentage of annual mortgage interest, which helps increase disposable income. The remaining interest qualifies for the standard mortgage interest deduction, further benefiting the borrower.

Aside from statewide first-time homebuyer programs in South Dakota, city-specific programs are available to help you pursue homeownership in a city of your choosing. Check out the table below for some of the cities in South Dakota that provide first-time homebuyer programs for potential residents.

Zero-down-payment loan programs in South Dakota allow you to purchase a home without putting money down. USDA and VA loans are two government-backed options that have no down payment.

USDA loans help individuals in rural areas become homeowners. These loans are issued by the U.S. Department of Agriculture through its Rural Development Guaranteed Housing Loan program. This initiative aims to improve the quality of life and economic vitality in rural America.

USDA loans require no down payment, making homeownership more accessible to those who may not have substantial savings. Additionally, these loans come with competitive interest rates and reduced mortgage insurance costs, which can result in significant savings over the life of the loan. The program supports low to moderate-income households in purchasing a safe and affordable home.

To qualify for a USDA loan, certain conditions must be met. The property must be 2,000 square feet or smaller and located in a USDA-eligible rural area with fewer than 35,000 people. Additionally, applicants must meet specific income limits, which vary based on location. For instance, in Bennett County, SD, the income limit for a four-person household is $71,900, while in Brookings County, SD, it is $85,200. These limits ensure that the program supports those who truly need financial assistance in purchasing a home.

VA loans are specialized mortgage products the U.S. Department of Veterans Affairs provides. These loans assist veterans, active-duty service members and certain members of the National Guard and Reserves in purchasing homes.

VA loans offer several financial advantages, including a no-down payment requirement, which can make homeownership more accessible. These loans do not require private mortgage insurance (PMI), reducing overall costs. Borrowers often benefit from lower interest rates compared to conventional loans. In South Dakota, the APR for a 15-year fixed-rate VA loan is 6.27%, and 6.31% for a 30-year fixed-rate VA loan as of November 2024.

Eligibility for VA loans depends on several factors, including length of service, duty status and character of service. Applicants must also meet income limits based on their location and obtain a valid Certificate of Eligibility (COE) to qualify.

First-time homebuyers in South Dakota can take advantage of low-down-payment loan programs that allow them to finance their home with a down payment of 3.5% or less. These programs include conventional, FHA and FHA 203(k) loans.

FHA loans and conventional loans are often compared as they are the two most common types of mortgages. FHA loans require at least a 3.5% down payment, while conventional loans may require as low as 3% for first-time homebuyers. Conventional loans typically have stricter credit score and debt-to-income ratio requirements than FHA loans.

As of November 2024, the current APR for a 15-year fixed-rate conforming loan in South Dakota is 6.10%. In comparison, the APR for a 15-year fixed-rate FHA loan is 7.45%. APRs on FHA loans can be higher because there tend to be more fees and extra costs associated with borrowing money on government-backed loans.

You can use our FHA vs. conventional loan calculator below to compare FHA and conventional mortgage programs and determine the best option for you.

We answered some frequently asked questions about first-time homebuyer programs in South Dakota to help you determine the best option for you and get closer to homeownership.

Explore additional MoneyGeek resources for first-time homebuyers in South Dakota to help you with the homebuying process.