South Dakota First-Time Home Buyer: 2024 Programs and Grants

What to know about buying a house in South Dakota

South Dakota’s average home prices are below the national median. But they saw big growth between 2021 and 2022.

Luckily, South Dakota offers valuable programs to help first-time home buyers, including special mortgages, down payment assistance, and tax breaks. Here’s how to get started.

In this article (Skip to...)

• SD overview
• Home loan options
• SD programs
• First-time buyer grants
• Buying in South Dakota’s cities
• Resources
• SD mortgage rates

South Dakota home buyer overview

The median list price in South Dakota was $312,700 in February 2024, according to Redfin. That increased 7.4% year-over-year.

South Dakota home buyer stats

Down payment amounts are based on the state's most recently available average home sale price. “Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.

If you're eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the U.S. Department of Agriculture), you may not need any down payment at all.

First-time home buyer loans in South Dakota

If you’re a first–time buyer in South Dakota with a 20% down payment, you can get a conventional loan with a low interest rate. And you never have to pay for private mortgage insurance (PMI). The same goes for buyers anywhere in the nation.

Of course, few first-time buyers have saved a 20% down payment. But the good news is, you don’t need one.

South Dakota home buyers can often get into a new home with as little as 3% or even 0% down using one of these low-down-payment mortgage programs:

• Conventional 97: From Freddie Mac or Fannie Mae. 3% down payment and 620 minimum credit score. You can usually stop paying mortgage insurance after a few years
• FHA loan: Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. But you’re on the hook for mortgage insurance premiums (MIP) until you refinance to a different type of mortgage, move, or pay off your loan
• VA loan: Only for veterans and service members. Zero down payment is required. Minimum credit score varies by lender but often 620. No ongoing mortgage insurance premiums after closing. These are arguably the best mortgages available, so apply if you’re eligible
• USDA loan: For those on low-to-moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by lender but often 640. Low mortgage insurance rates
• South Dakota Housing Development Authority (SDHDA) loans: You might be able to combine one of these with a second mortgage that covers much or all your down payment and closing costs needs (3% or 5% of the main mortgage value). You might also qualify for a mortgage credit certificate. More information below

Note that government loan programs (FHA, VA, and USDA home loans) require you to buy a primary residence, which can be a single-family home or a 2-4-unit property. That means you can’t use these loans for a vacation home or investment property.

Most programs let you use gifted money or down payment assistance to cover the down payment and closing costs. So depending on the loan type you choose, you could potentially get into a home with very little cash out of pocket.

If you’re not sure which loan program to choose for your first mortgage, your loan officer can help you find the right match based on your finances and home buying goals.

South Dakota first-time home buyer programs

The South Dakota Housing Development Authority (SDHDA)⁴ offers special mortgages to first-time buyers across the state. These offer the possibility of competitive interest rates or down payment assistance, together with a mortgage credit certificate (MCC).

The SDHDA explains, “SDHDA’s Tax Credit is available through a Mortgage Credit Certificate (MCC), which reduces the amount of federal income tax you pay, giving you more disposable income. With SDHDA’s Tax Credit (MCC), a percentage of your mortgage interest can be used as a dollar-for-dollar reduction in your tax bill and the remaining interest paid is still eligible for the home mortgage interest deduction.”

Eligibility criteria for SHDHA mortgage programs include:

• You have not owned a home in the past three years
• Your income is below local household income limits⁴
• Your home price is within local purchase price limits⁵
• You choose a lender from this list of participating lenders
• You qualify for the mortgage based on income, credit score, existing debts, etc.

The SDHDA has an online first-time home buyer calculator that can help you determine if you’re likely to be eligible. But it says, “The only way to know for sure if you qualify or not is to apply by contacting an SDHDA Participating Lender.”

The Authority publishes its current mortgage rates online. Be sure to compare them with wider mortgage rates today to see how competitive they are. But take into account the value of your MCC and down payment assistance when you do.

South Dakota first-time home buyer grants

On the face of it, the SDHDA’s down payment assistance is generous. Provided you qualify, you can borrow either 3% or 5% of your mortgage loan amount toward your down payment and closing costs.

This takes the form of a “silent” second mortgage. That means you pay 0% interest and don’t make monthly payments. You just repay the sum you borrowed when you refinance or sell the home. Check whether the loan is repayable if you move out but retain ownership.

SHDHA’s down payment assistance is a good deal. But you will pay a higher mortgage rate on your main home loan if you take advantage of it.

On the day we viewed the authority’s rate table, the rate for someone with a 3% down payment assistance loan was a full percentage point (1%) more than for someone without the assistance. And someone with a 5% DPA loan would pay 1.125% more on their main home loan. This doesn’t necessarily make it a bad deal. But you should be aware of these higher rates.

Also check out Grow South Dakota’s mortgage and down payment assistance programs.

Buying a home in South Dakota’s major cities

For a South Dakota first-time home buyer, Aberdeen remains the most affordable of the state’s three biggest cities. Sioux Falls and Rapid City have more costly homes, while the former saw the largest annual rate of price growth from 2022.

Sioux Falls first-time home buyers

The median home listing price in Sioux Falls was $350,000 in February 2024, according to Realtor.com. That rose 1.5% year-over-year.

At those home prices, making a down payment in Sioux Falls, SD might cost:

• $10,500: Minimum down payment of 3%
• $70,000: Maximum down payment of 20%

The only down payment assistance program we could find on the City of Sioux Falls website applies only to “police officers, firefighters, and other public safety employees.” If you’re one of those, check out The Public Safety Down Payment Assistance program because it looks pretty good.

Rapid City first-time home buyers

The median home listing price in Rapid City was $365,000 in February 2024, according to Realtor.com. That increased 1.4% year-over-year.

At those home prices, making a down payment in Rapid City, SD might cost:

• $10,950: Minimum down payment of 3%
• $73,000: Maximum down payment of 20%

Again, we could find no down payment assistance program for Rapid City or Pennington County. You can check with City Hall by calling (605) 394-9300 to make sure we didn’t miss anything.

Aberdeen first-time home buyers

The median home listing price in Aberdeen was $199,900 in February 2024, according to Realtor.com. That fell 16.7% year-over-year.

At those home prices, making a down payment in Aberdeen, SD might cost:

• $5,997: Minimum down payment of 3%
• $39,980: Maximum down payment of 20%

Once again, we could find no trace of a down payment assistance program on Aberdeen’s official website. However, the city is located in Brown County, and that does seem to be covered by Homes Are Possible, Inc.’s (HAPI’s) program.

HAPI offers up to $5,000 in down payment assistance. This is a 0%-interest loan with no monthly payments. And it must be repaid in full only when you sell the home or refinance your main mortgage. See whether this or the SDHDA’s program suits you better.

Where to find home buying help in South Dakota

All the organizations we’ve listed above should provide advice freely to any first-time home buyer in South Dakota or the area they serve.

In addition to our selection, the U.S. Department of Housing and Urban Development (HUD) provides a list of city– and county-specific programs across South Dakota. These are as follows:

Statewide first-time home buyer programs in South Dakota

• Community Action Agencies — Agencies provide services throughout the state
• Habitat for Humanity — Offers homeownership through sweat equity
• South Dakota Housing Development Authority (SDHDA) — Assistance for low and moderate-income South Dakotans (605) 773-3181
• The Governors House — Provides reasonably sized, affordable homes to income-qualified individuals and families.
• Tribal Housing Authorities — Many offer homeownership programs
• U.S. Department of Agriculture Rural Development — Affordable financing for rural homebuyers

South Dakota home buyer programs by city/county

• Aberdeen: Homes are Possible Inc. (HAPI) — Serving Beadle, Brown, Campbell, Day, Edmunds, Faulk, Hand, Hughes, Hyde, Marshal, McPherson, Potter, Roberts, Spink, Stanley, Sully and Walworth counties. Call (605) 225-4274 for information
• Sisseton: GROW South Dakota — Offers an affordable home program. Call (605) 698-7654 for information
• Yankton: Planning & Development District III — Has a variety of homebuyer programs available. Call (800) 952-3562 for information

What are today’s mortgage rates in South Dakota?

You can check today’s average mortgage rates in South Dakota here. Or, you can use the link below to get a custom rate quote for your new loan.

Remember, interest rates vary by borrower. Your own mortgage interest rate depends on factors like your credit score, loan program, down payment, and more. Compare mortgage loan quotes from at least three different lenders to make sure you’re getting the lowest rate and upfront fees possible.

And don’t forget to ask your lender about down payment and closing cost assistance. These programs could seriously lower the barrier to buying your first house.

¹Source: Redfin South Dakota Housing Market report

²Source: Experian.com 2022 study of 2021 data

³Based on a review of the state's available DPA grants at the time this was written

⁴South Dakota Housing Development Authority (SDHDA)

⁴South Dakota Local Household Income Limits

⁵South Dakota Local Purchase Price Limits