The influx of out-of-state homebuyers into South Dakota is driving up housing demand, making it harder to find good home deals. However, knowing the latest mortgage rates and the optimal home buying process can help you compete with other homebuyers.
In this guide, you’ll learn everything you need to know about mortgage rates in South Dakota. Read on to find the latest South Dakota mortgage and refinance rates, as well as a complete guide on the state’s homebuyer assistance programs!
Home Loan Options In South Dakota
You can choose from three home loan types when buying a home in South Dakota. All these mortgage options have their advantages and disadvantages, so be sure that you choose the one that best fits your needs.
Conventional home loans are mortgages not backed by government entities. They’re usually offered by banks and private lenders, with loan limits issued by the Federal Housing Finance Agency (FHFA). For the entire State of South Dakota, the conforming loan limit is $548,250.
Conventional loans are further divided into three main types, each featuring its unique rate schemes.
A fixed-rate mortgage’s interest and annual percentage rate stay constant regardless of market changes. This means your monthly payment amounts will stay constant until the entire loan is paid off.
Thanks to this predictability, fixed-rate mortgages are popular among first-time homebuyers and long-term financial planners. However, fixed-rate loans tend to have higher rates compared to other loan types.
Most borrowers opt for 30-year loans since they offer low monthly payments. If you want lower rates, you can choose shorter 15-year or 20-year loan terms instead.
Adjustable-Rate Mortgage (ARM)
The interest and annual percentage rate on an ARM change annually based on market index movements. This annual adjustment means your monthly payment amount will rise or fall each year.
This makes ARMs relatively unpredictable compared to other loans. However, most ARMs include an introductory period with fixed interest rates. Your introductory rates are usually low compared to other loans, which makes them great for short-term savings.
An ARM’s introductory period length is usually stated on its name – for example, a 5/1 ARM has a five-year introductory period.
You can opt for a jumbo loan if you’re looking for higher loan amounts. Jumbo loans can bypass FHFA loan amount limits with the caveat of higher interest rates.
Government-Backed Loan Programs
The federal government backs three major loan programs to boost homeownership rates among select demographics, like veterans and low-income homebuyers. These three loan types are:
FHA loan: Designed for borrowers without good credit, FHA loans offer low rates and relaxed qualification requirements. However, they have loan limits and mortgage insurance fee commitments until the end of the loan.
VA loan: Only active-duty and former military personnel can qualify for VA loans. To take advantage of its zero-down feature, you need to pay 2.3% of the loan in funding fees. You can drive the funding fees down by putting more money down.
USDA loan: Because USDA loans are designed to build rural communities, they have strict area limitations. You’ll get a zero-down mortgage with low mortgage insurance fees if you qualify for a USDA loan.
Refinances “replace” your old loan by providing you with a new mortgage to pay it off. They’re usually done to accomplish one of two things:
Change your loan details: Rate and term refinances allow you to alter your loan type and length. You can shorten or extend your loan duration as well as change its type from an ARM into a fixed-rate loan or vice versa.
Liquidate home equity: Cash-out refinancing converts home equity into cash by providing you a loan larger than your current mortgage balance. Any money left after paying off the loan can be used for other purposes.
Compare Mortgage Rates In South Dakota
Historically, mortgage rates in South Dakota have adhered closely to the national average mortgage rates.
Compare rates in the Mount Rushmore State using the table below. All mortgage and refinance rates listed are taken from America’s top lenders.
Today’s Mortgage Rates In South Dakota
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These mortgage and refinance rates may change without prior notice. Your actual rates may vary depending on your financial circumstances and other factors.
Input your financial details into the rate calculator above for a customized look at your South Dakota mortgage rates.
First-Time Homebuyer Programs In South Dakota
Applying for homebuyer assistance programs can help you find more affordable mortgages. Through the South Dakota Housing Development Authority (SDHDA), the state offers these mortgage and down payment assistance programs:
SDHDA First-Time Homebuyer Program
The state’s main first-time homebuyer program offers low-interest loans through a participating lender with the following qualification requirements:
Have a minimum credit score of 620
Meet SDHDA’s income limits
Complete a homebuyer education course
Have not owned a home in the past three years
Buy a primary residence under South Dakota purchase price limits
SDHDA Fixed Rate Plus
South Dakota also provides a down payment and closing cost assistance program called the Fixed Rate Plus. This program offers cash assistance worth up to 3% of your mortgage as a second loan. Your down payment loan has zero interest and is due after 30 years or when you pay off the main mortgage, whichever comes sooner.
Buying A Home In South Dakota
Home buying is a large expense, and making mistakes during the process can cost you even more. To avoid any costly missteps, follow these six steps!
Step 1: Seek Pre-Approval
Getting pre-approved can smooth out your home buying process. Start a mortgage process at a financial institution and pass their credit checks.
Once you pass these checks, you’ll receive a pre-approval letter containing key details of your loan like its maximum amount and interest rate. This letter acts as a budget guide for your house hunt as well as a sign of your financial readiness to buy a home.
Step 2: Recruit A Real Estate Agent
An experienced real estate agent can help you secure the best housing deals and answer your questions about the neighborhood. Pay close attention to their years of experience and review scores when making your decision.
Step 3: Look For Homes
Start by choosing a neighborhood within your price range. Look for homes in local listings and choose the most affordable house there that still fulfills your needs. If there are no homes that tick all your boxes, consider buying a fixer-upper and using the money you save for home improvements.
Step 4: Make An Offer
You may encounter some competition when searching for your dream home. Putting down a larger offer often helps boost your odds of landing the purchase. Consult with your realtor about how much over the listed property value you should offer to avoid overpaying.
Step 5: Do Your Due Diligence
Always check your purchase before closing the deal. Hire home inspectors and appraisers to examine your new property. If they find that the home is overvalued or has severe property defects, you can renegotiate a deal with the seller.
Step 6: Finish The Deal
Prepare the money to pay your closing costs and origination fees before scheduling a closing date. On closing day, have your realtor present to answer any lingering questions before signing the paperwork and finalizing your purchase.
How To Get Better South Dakota Mortgage Rates
Since mortgages are a long-term financial commitment, any savings will eventually add up. The money you saved from reducing your mortgage rates can end up saving you thousands in the long run.
Follow these tips to reduce your South Dakota mortgage rates!
Take Shorter Loan Terms
Lenders bear less risk on shorter loans, meaning you’re likely to get better rates on them. A shorter loan term also means you’re charged fewer interest payments, further driving down your total expected costs.
Before you apply for shorter loan terms, make sure that you can afford the more expensive monthly payments.
Work With Independent Mortgage Brokers
Comparing loan offers from multiple lenders can help you save, but it may be difficult if you don’t know what you’re looking for. Independent mortgage brokers help you by scouring the market for the most favorable loan offers and providing advice on which loans you should take.
Buy Mortgage Points
You can buy mortgage points to reduce your interest rates. Each of these points usually costs 1% of your loan and provides a 0.25% rate reduction. These points only apply to your current loan, so you should only buy them if you’re not looking to refinance.
Additional Rate Reduction Steps
In addition to the three aforementioned tips, there are other ways to reduce your interest rates:
Provide a larger down payment.
Improve your credit score.
Compare multiple lender offers.
Knowing the latest mortgage rates and understanding the home buying process can help you in many ways. It allows you to find good home deals easier and act quickly to secure them before other buyers.
If you’re looking for the best home loans in South Dakota, Wesley LLC is here to help. Contact our professional team today for more mortgage resources and advice!