Glacial lakes, delicious foods, bustling cities and quaint country towns make South Dakota a great place to call home. The Mount Rushmore State offers no shortage of attractions for the entire family.
If you’re searching for a home in South Dakota, remember to shop around and compare mortgage rates. What may seem like a small difference could add up to thousands over the course of a 15-year or 30-year mortgage.
- Mortgage debt in South Dakota
- Types of home loans
- Conforming loan limits in South Dakota
- First-time homebuyer programs in South Dakota
- Mortgage refinancing rates in South Dakota
Mortgage debt in South Dakota
Credit Karma members with mortgages in South Dakota had average mortgage debt of $161,674 in 2020, with average monthly mortgage payments of $1,170.
That puts South Dakota a good bit below average for both mortgage debt and average monthly mortgage payments compared to Credit Karma members across the U.S. in 2020.
Types of home loans
If you choose to finance your dream home, you might be overwhelmed with the number of mortgage loan options out there. Here are some of the more common mortgage types South Dakota homeowners may consider.
Conventional loans in South Dakota
Conventional loans are mortgages that aren’t part of government programs. These loans tend to be good for people with solid credit and a down payment of at least 3% to 5%.
South Dakota FHA loans
FHA loans are a good option for first-time homebuyers to explore — particularly if your credit is less than perfect. That’s because you may be able to qualify with credit scores as low as 580 with a 3.5% down payment or 500 with a down payment of 10%. This FICO® score requirement is the FHA minimum standard. In general, additional lender credit score requirements may apply.
The FHA loan limit in 2023 is generally $472,030 for a one-unit property, but it can reach as high as $1,089,300 depending on where you live.
Every area in South Dakota conforms to the FHA loan limit of $356,362 in 2021.
You can find the exact limit by county on the U.S. Department of Housing and Urban Development website.
VA loans in South Dakota
If you’re an eligible veteran or service member comparing mortgage rates in South Dakota, a VA loan can be attractive since down payments and mortgage insurance aren’t typically required, and you may be able to qualify even if you don’t have great credit.
Similar to FHA loans, VA loans are insured by the federal government but issued by private lenders.
Conforming loan limits in South Dakota
Conforming loans are a type of home loan that meets certain loan limits set by the Federal Housing Finance Agency. This means they can be bought by Fannie Mae and Freddie Mac, federal-government-sponsored enterprises that guarantee mortgages.
Loans that exceed conforming loan limits are known as jumbo loans. Lenders often consider these loans riskier than conforming loans.
All of South Dakota’s counties have a conforming loan limit of $548,250 in 2021.
First-time homebuyer programs in South Dakota
If you’re hoping to buy your first home, there may be some assistance programs available to you in South Dakota.
- First-Time Homebuyer Program: Offered by the South Dakota Housing Development Authority (SDHDA), the First-Time Homebuyer Program grants mortgages with low, fixed interest rates and cash assistance to first-time homebuyers. To be eligible, you must meet certain income limits and purchase a home that doesn’t cost more than $300,000.
- Repeat Homebuyer Program: This SDHDA program is offered to those seeking a new home who have owned property before, along with those who exceed the First-Time Homebuyer Program’s limits. This option offers fixed-rate mortgages with down payment and closing cost assistance. Purchase price limits and income limits apply, and a minimum credit score of 620 is required. There’s no requirement to have a prior SDHDA loan to use this program, but if you had a prior SDHDA mortgage, that loan must be paid in full.
- Tax Credit: The SDHDA Tax Credit is a Mortgage Credit Certificate. With this credit, you may save money on your federal tax bill. You can claim this mortgage interest deduction if you’re a first-time homeowner and meet certain income and purchase price limits.
Mortgage refinancing rates in South Dakota
If you’re thinking about refinancing your mortgage, keep a few things in mind:
- Break-even cost — Once you know the closing costs for your refinance, you can use any savings on your monthly mortgage payment to calculate how long it will take you to recoup that investment and “break even.”
- Cash-out refinance — Have you accumulated equity in your home that you’d like to convert to cash? A cash-out refinance lets you refinance your home for more than what you owe and get cash in return. But you’ll owe the full amount plus interest and you’ll end up owning less equity in your home, which means less cash in your pocket if you sell in the future.
- Loan term — You also may want to either shorten or extend your loan term. For instance, if you have a 30-year mortgage, you may want to convert it to a 15-year loan. Keep in mind that reducing your term likely means you’re paying more each month — but less in interest over time. Lengthening your loan term may mean you pay less each month, but more interest over the course of the mortgage.