Are you looking to buy your very first house in South Dakota? This state is a wonderful place to hang your hat, but you probably have a lot of questions about the home buying process. For instance, how do you find the best mortgage lender?
We’ve created this quick first time buyer’s guide to walk you through the mortgage process in South Dakota.
Best Mortgage Lenders for First Time Home Buyers in SD:
- Best Overall in South Dakota: Rocket Mortgage®
- Best for Low-Income Home Buyers: Citi
- Best for In-Person Experience: First Dakota National Bank
- Best for Mortgage Options: Wells Fargo
- Best for VA Loans: Veterans United
The Housing Market in South Dakota: An Overview
The first thing you should do when preparing to buy a home is familiarizing yourself with your state’s — and area’s — market and average home prices.
Here’s a quick look at the median home values of top cities in South Dakota:
Total households: 290,245
Median list price: $219,900
3 most expensive cities in South Dakota to buy a house:
- Spearfish: $226,321
- Sioux Falls: $196,960
- Rapid City: $190,997
3 most affordable cities in South Dakota to buy a house:
- Huron: $129,999
- Yankton: $159,463
- Watertown: $165,345
Now that you have a good idea of what you can expect to pay for your first home, we’ll get you ready for the mortgage process.
Preparing for a Mortgage
Next, we’ll walk you through the mortgage process to make sure you have all the resources and documentation you’ll need at your disposal.
First Time Home Buyer Mortgage Process in South Dakota
The current state of your finances plays a large role in determining the type of mortgage you apply for. Before applying, here’s what you should know:
- Your current credit score: Lenders look at your credit score to determine your spending and payment habits. All mortgage lenders have different credit score requirements, so be sure to know where you stand before applying.
- Your down payment amount: Knowing how much of a down payment you can afford will help you search for the right type of mortgage. Different lenders and mortgage types have different requirements, so figure out the amount you can put down on a home before opting for a specific lender or mortgage type.
What You’ll Need
Once you’ve figured out the math, it’s time to gather some key documents you’ll need when applying for your mortgage. Having them ready to go can speed up the application process.
Be ready to provide your:
- Social Security number
- Tax information (from the past 2 years)
- Pay stubs (from the past 2 months)
- Banking account totals (checking, savings, retirement and other investment accounts)
Additional documentation may be required depending on your lender.
Next, you can use the below list of popular lenders in South Dakota to determine if you meet their minimum credit score requirements.
| Lender | Minimum Credit Score Required |
|---|---|
| Rocket Mortgage® | 620 |
| Bank of America | 620 |
| Citibank Mortgage | 620 |
| Wells Fargo | 620 |
Mortgage Options
As a first time home buyer, you should know the different types of home loans available. They all have different requirements and benefits, so we’ll walk you through the 5 most popular options below.
Conventional Loan
This home loan is funded through traditional means, by banks or credit unions. A conventional loan typically has a higher interest rate since it is not backed by the federal government. They also often have low down payment and application requirements, making them easier to get approved for.
FHA Loan
This home loan is funded through the Federal Housing Administration (FHA) for first time home buyers. An FHA loan typically has a lower than market interest rate, low credit score requirement (580) and low down payment minimum (3.5%). FHA loans can be secured through many conventional mortgage lenders.
USDA Loan
This home loan is funded through the U.S. Department of Agriculture (USDA) for homes bought in rural areas of the U.S. A USDA loan typically has a lower-than-market interest rate, low credit score requirement (640) and usually no down payment requirement. USDA loans can be secured through many conventional mortgage lenders.
VA Loan
This home loan is funded through the U.S. Department of Veterans Affairs and is designed to help former and current military personnel and their families finance a home. A VA loan typically has a lower-than-market interest rate, no set credit score requirement and no down payment requirement. VA loans can be secured through many conventional mortgage lenders and VA-only lenders.
Jumbo Loan
This home loan can be either an FHA or conventional loan and is used to purchase homes of high values (typically over $484,350, depending on your location). A jumbo loan typically has higher down payment expectations and stricter credit score requirements. Expect to pay a 20% down payment for most lenders, though online lenders like Rocket Mortgage® only require 10% down.
First Time Home Buyer Programs in South Dakota
The South Dakota Housing Development Authority (SDHDA) offers a handful of programs designed to help first time home buyers like you better afford a home. Here are the top programs you should consider:
- SDHDA Mortgage Program: This first time home buyer’s mortgage program helps you afford a low-rate mortgage. To qualify, you’ll need to meet the SDHDA income requirements, make sure the home you’re purchasing is under $275,000 and confirm that the home will be your new primary residence.
- SDHDA Down Payment Assistance: If you need help with closing costs or your down payment, look into the SDHDA down payment assistance program. This program provides up to 3% in the form of a second mortgage to qualifying buyers. This loan is interest-fee and due when the home is resold or when the first mortgage is paid off.
- Governor’s House Program: Though not exclusive to first time home buyers, this program helps lower-income residents better afford a home. If you meet income requirements, this program will actually build you a qualifying home for a reasonable rate (starting at $48,700 for a 2-bedroom home). You can learn more about this unique program at the SDHDA website.
Current Mortgage Rates in South Dakota
Your mortgage rate is the interest rate you’ll pay on your loan, throughout the duration of your mortgage. Securing a lower rate could end up saving you tens of thousands in interest payments.
Your individual mortgage rate is determined by your lender based on your credit score, down payment, home location, type of mortgage and mortgage term.
Your mortgage term is the length of your loan. There are 2 primary types of mortgage terms: fixed and adjustable. A fixed mortgage lets you pay the same amount each month for the duration of your loan. An adjustable mortgage (ARM) lets you pay a set amount for your introductory period. After this period, your rate will change based on the market and your monthly payment amounts will fluctuate.
Mortgage rates can vary greatly from city to city. To help, we’ve compiled median mortgage rate information for South Dakota, to give you a better idea of what you can expect your rate to be.
| Loan Type | Rate | APR |
|---|---|---|
| 30-year fixed | N/A | N/A |
| 15-year fixed | N/A | N/A |
| 7/1 ARM (adjustable rate) | N/A | N/A |
| 5/1 ARM (adjustable rate) | N/A | N/A |
Closing a Mortgage
Now that you understand the different types and terms of mortgages, you should understand how to closing process works. Closing is the final step in the mortgage process.
Closing will begin with a final walkthrough of your new home to determine it’s in the same condition as documented in your paperwork. From there, you’ll sign all remaining paperwork, pay any funds you owe (down payments and closing costs) and get the keys to your new home.
The time it takes to move through the closing process varies by lender but is typically between 30 and 45 days. Online lenders, like Rocket Mortgage®, can help you navigate through this process much faster.
Here are average closing timelines based on the top mortgage lenders in South Dakota.
| Lender | Average Days to Close Loan |
|---|---|
| Rocket Mortgage® | 30 days |
| Bank of America | 45 days |
| Citibank Mortgage | 30 days |
| SunTrust | 60 days |
6 Best Mortgage Lenders in South Dakota for First Time Home Buyers
Now that you understand everything you need to know about your first mortgage, it’s time to look for a mortgage lender. We’ve compiled the top lenders in the state and broken them into categories to help.
- Online Mortgages
1. Best Overall: Rocket Mortgage®
Powered by Quicken Loans®, Rocket Mortgage® is quickly becoming one of the top mortgage solutions throughout South Dakota. Its online application takes just minutes to complete, after which you’ll see your approval status and mortgage options. If you have questions, Rocket Mortgage® has 24/7 customer service associates ready to help.
Loan types offered: Conventional, FHA, USDA and VA
Credit score requirement: 620
2. Best for Low-Income Buyers: Citibank Mortgage
If you’re seeking a more traditional mortgage lender, but can’t afford a large down payment, look into Citibank Mortgage. As a top lender in South Dakota, Citi Mortgage can help you with down payment assistance and a large offering of first time home buyer mortgage options. It also considers alternative credit and offers mortgage discounts to existing members.
Loan types offered: Conventional, FHA and VA
Credit score requirement: 620
3. Best for In-Person Experience: First Dakota National Bank
If you’d rather let an experienced mortgage professional walk you through the application process and review your options with you, consider financing with First Dakota National Bank. This bank offers an in-person experience throughout South Dakota and can offer the guidance you need to find the best mortgage for your financial situation.
Loan types offered: Conventional, FHA, USDA and VA
Credit score requirement: 620
4. Best for Mortgage Options: Wells Fargo
Wells Fargo is one of the top mortgage lenders in the state and it boasts a large selection of mortgage options to choose from. It also provides loan assistance programs for first time home buyers and has down payment requirements as low as 3% to help you better afford to buy a new home.
Loan types offered: Conventional, FHA, USDA and VA
Credit score requirement: 620
5. Best for VA Loans: Veterans United
If you’ve logged some time in the military, Veterans United’s loans will likely be the best deal. Unlike other veteran-marketed loan programs, Veterans United only accepts active duty and veteran military members.
In addition to no-down-payment loans, you’ll also eliminate the private mortgage insurance you’ll have to pay with other mortgages.
Veterans United is also more forgiving of lower credit scores. Interest rates are lower than average.
Get Ready to Buy Your First Home in South Dakota
We know that buying a home is a huge decision that will impact your life for years to come. Be sure to take the time you need to thoroughly research your mortgage options and decide what mortgage benefits are most important to you. Then, partner with a lender who has your financial well-being in mind.
Frequently Asked Questions
1) Q: How do I get pre-approved?
First, you need to fill out an application and submit it to the lender of your choice. For the application you need 2 previous years of tax returns including your W-2’s, your pay stub for past month, 2 months worth of bank statements and the lender will run your credit report. Once the application is submitted and processed it takes anywhere from 2-7 days to be approved or denied. Check out our top lenders and lock in your rate today!
2) Q: How much interest will I pay?
Interest that you’ll pay is based on the interest rate that you received at the time of loan origination, how much you borrowed and the term of the loan. If you borrow $208,800 at 3.62% then over the course of a 30-year loan you will pay $133,793.14 in interest, assuming you make the monthly payment of $951.65. For a purchase mortgage rate get a quote here. If you are looking to refinance you can get started quickly here.
3) Q: How much should I save for a down payment?
Most lenders will recommend that you save at least 20% of the cost of the home for a down payment. It is wise to save at least 20% because the more you put down, the lower your monthly payment will be and ultimately you will save on interest costs as well. In the event that you are unable to save 20% there are several home buyer programs and assistance, especially for first time buyers. Check out the lenders that specialize in making the home buying experience a breeze.
Related content: Best Homeowners Insurance in South Dakota
Get Ready for Take Off
Rocket Mortgage® is an online mortgage experience developed by the firm formerly known as Quicken Loans®, America’s largest mortgage lender. Rocket Mortgage® makes it easy to get a mortgage — you just tell the company about yourself, your home, your finances and Rocket Mortgage® gives you real interest rates and numbers. You can use Rocket Mortgage® to get approved, ask questions about your mortgage, manage your payments and more.
You can work at your own pace and someone is always there to answer your questions — 24 hours a day, 7 days a week. Want a fast, convenient way to get a mortgage? Give Rocket Mortgage® a try.