Types of Home Loans Available Through South Dakota Housing

For many first-time homebuyers, securing the right home loan is key to making that dream a reality. Fortunately, South Dakota Housing offers several programs specifically designed to make homeownership more affordable.

In this guide, we’ll explore the home loans available for first-time homebuyers and explain how you can qualify for them.

What Is a First-Time Homebuyer Loan?

A first-time homebuyer loan is a mortgage program designed for homebuyers purchasing their first home. These loans typically offer benefits like lower downpayment requirements, lower interest rates, and easier qualifying terms to help first-time buyers.

This program makes homeownership more accessible, especially for homebuyers who may not have large savings for a downpayment on a home.

How Do You Get a First-Time Homebuyer Loan?

Securing a first-time homebuyer loan may seem hard, but the process can be easy by following these steps of what to expect when applying for a home loan as a first-time homebuyer:

1. Review Your Financial Situation

Before applying, it’s important to check your finances. This includes checking your credit score, calculating your debt-to-income ratio, and saving for a downpayment. A clear understanding of your finances will help you determine how much home you can afford.

2. Get Pre-Approved by a Participating Lender

The next step is to get pre-approved for a mortgage. This involves submitting an application to a participating lender, who will review your credit score, income, and debt to provide you with a pre-approval amount. This pre-approval shows sellers that you’re serious about buying and helps narrow down your home search to properties within your budget.

Find out what current interest rates for first-time and repeat homebuyer loans are while using our mortgage calculator to estimate what loan amount you can afford.

3. Apply for a First-Time Homebuyer Loan

Once you find the right home, it's time to apply for a loan. Many eligible borrowers turn to specific programs designed to make homeownership more affordable. South Dakota Housing (SDH) offers several options, such as the First-Time Homebuyer Program and the Fixed Rate Plus Loan, which provide downpayment assistance and low fixed-rate mortgages. These programs make it easier to cover upfront costs and secure financing.

Read more on important steps every first-time homebuyer should do to secure a home.

4. Underwriting and Approval

After you’ve submitted your loan application, the participating lender will begin the underwriting process. This involves confirming your financial information and appraising the property. If everything checks out, the participating lender will issue final approval for your loan, and you'll be ready to close on your new home.

5. Closing

Once your loan is approved, the final step is closing, where you’ll sign all the necessary documents and officially become a homeowner. Any downpayment and closing costs will be due at this time, and with programs like SDH’s Downpayment Assistance Program, you may qualify for assistance that covers a portion of these expenses.

Learn about the different closing costs and fees you may not have known about.

First-Time Homebuyer Loan Program Options

Below are the key first-time homebuyer loan programs available through SDH, each for different financial needs and situations.

Downpayment Assistance Program

The downpayment assistance program is one of the most popular options for first-time homebuyers in South Dakota. This first-time homebuyer Fixed Rate Plus Loan option offers a low fixed-rate mortgage along with downpayment assistance. Buyers can receive 3% or 5% of the loan amount to help cover the downpayment and closing costs.

The assistance is provided as a second mortgage with 0% interest, and there are no payments until the home is sold or the first mortgage is fully paid off. This program is ideal for those who need help covering the upfront costs of purchasing a home.

If you want to boost your downpayment fund, learn these key strategies to reach your goal faster.

Grants for Grads

If you’ve graduated within the last five years, the Grants for Grads program is here to help you. This program offers 5% of the loan amount to help with downpayments and closing costs. It’s a great option for recent graduates who want to settle down in South Dakota.

With this program, you can make your transition from student life to homeownership possible.

Governor’s House Program

The Governor’s House Program provides affordable, energy-efficient homes for income-qualified buyers. These homes are designed to be budget-friendly, low-maintenance, and built with modern amenities. The Governor’s House Program offers two- and three-bedroom options, making it a great choice for families or individuals looking for long-term affordability.

Community Home Improvement Program (CHIP)

The Community Home Improvement Program (CHIP) helps South Dakota homeowners make improvements or repairs to their single-family homes. CHIP loans are available at a fixed interest rate of 2.9%, providing affordable monthly payments that are structured based on individual underwriting guidelines.

Learn about what repairs and home improvements are eligible with a CHIP loan.

Conclusion

South Dakota provides several first-time homebuyer loan options to make homeownership more affordable. These programs offer downpayment assistance, affordable housing, and repair assistance. First-time homebuyers can use these resources to secure financing and simplify the homebuying process.

Reach out to South Dakota Housing Participating Lender to learn more. Start your journey toward homeownership with our home loans for first-time homebuyers.