More Options Than You May Think

There are more options than you might think when you are ready to finance a home. In addition to traditional bank loans, there are government programs (FHA, VA, and USDA Rural Development) that may fit your needs.

First-Time Homebuyer Program

The South Dakota Housing Development Authority (SDHDA) offers special mortgages for first-time homebuyers. SDHDA programs include competitive interest rates and down payment assistance, as well as a Mortgage Credit Certificate (MCC) that can reduce the amount of federal income tax you pay, giving you more disposable income. If you are eligible, you can borrow 3% or 5% of the mortgage amount and apply either for down payment and/or closing costs.

The SDHDA also offers the Repeat Homebuyer Loan Program, which provides assistance with down payment and closing costs. This program is designed specifically for repeat homebuyers who meet special income and purchase price limits and first-time homebuyers who exceed SDHDA’s requirements for first-time homebuyers

Additional Options for First-Time Homebuyers in South Dakota

USDA Rural Development

This program is available for both first-time homebuyers and non-first-time homebuyers. Applicants with low-and moderate-incomes who qualify for this program may obtain 100 % financed mortgage loans with no money down. USDA loans are available for certain properties that are located in rural areas. Mortgage Insurance is not required; however, you’ll have to pay an upfront fee of 1% of the loan amount and an annual fee of .35% which serves as mortgage insurance monthly payment. The loan will be repaid in monthly payments over a 30-year term and fixed interest rates are available. For income qualifications and current interest rates, refer to USDA Rural Development’s website at

USDA Rural Development
502 Direct Program

This program is available for both first-time homebuyers and non-first-time homebuyers. Rural Development (a direct lender that guarantees its own loans) provides this program to eligible low-to-very-low-income applicants who wish to obtain reasonable housing in rural areas. Applicants who qualify for this program may be able to obtain 100% financed mortgage loans with no money down. Mortgage insurance is not required, and income limits are more stringent and may vary depending on family size. The loan term can be up to 33 years. You can check your eligibility before applying by using the “self-assessment tool,” which is available by visiting For more details, refer to USDA Rural Development’s website at


FHA loans are insured by the office of Housing and Urban Development (HUD). FHA loans are probably the easiest for which to qualify, with a minimum down payment as low as 3.5%.
The upfront mortgage insurance premium (UFMIP) is a fee you pay one time at closing. As a general rule, the premium is 1.75% of the loan amount and can either be rolled into the loan amount or paid at closing. You will also be required to pay a mortgage insurance premium (MIP) on an annual basis for the life of your loan, except if you pay 10% or more at closing, in which case it will be removed after 11 years. The MIP will be broken down into monthly installments that are included in your mortgage payment.

Veteran’s Administration Loans

The terms are similar to Rural Development guidelines including 100% financing. A VA-backed/VA direct mortgage loan requires to pay a VA funding fee. This fee helps to reduce the cost of the VA home loan program for U.S. taxpayers since it does not require a down payment or monthly mortgage insurance. The funding fee amount depends on the amount of your loan and other factors. To use VA loans, Veterans, Active-Duty Military personnel and National Guard members must meet certain service requirements.

Conventional Financing

Conventional loans require as little as 3% down for first-time homebuyers and 5% for repeat homebuyers. Private mortgage insurance (PMI) is required for down payments less than 20%. PMI can be removed after 20% equity in the home is achieved, but other terms and conditions apply. There is no funding fee.