Living in South Dakota means having plenty of room to stretch out. One of the least populated states, it’s home to vast expanses of granite, grassland and canyons in landmarks like Mount Rushmore, the Badlands, and Black Hills National Forest. City lovers have opportunities here, too, especially in Sioux Falls and Rapid City. Despite a sluggish economy in the rest of the state, South Dakota’s two largest cities are growing steadily, with upticks in job numbers and record levels of building investment. Sioux Falls, for example, added 4,000 new residents last year, for a total of 187,200.
Severe weather disrupted home sales in much of the country in early 2019, but prices in Sioux Falls stayed the course. In May, the median price for a home in the city declined by only 0.5% to $210,000. Meanwhile, the supply of homes fell 12.9%, leaving just enough inventory for 3.7 months; a six-month supply of homes usually points to a more balanced market. Another plus for sellers: Homes in Sioux Falls sat on the market for 84 days, versus 88 days from the year before.
If you’re thinking of buying a home in South Dakota, you’ll need to consider the following rules and regulations:
Like many states, South Dakota imposes a real estate transfer tax at the time of closing on a home. This fee is determined by the total value of the home; buyers should know that lenders are responsible for telling you the amount once you’ve identified a property. South Dakota has a 0.1% transfer fee rate, which means buyers pay $0.50 for every $500 in home value, or $200 for a home worth $200,000.
According to Tax-Rates.org, the average property tax rate in South Dakota is now 1.28% of a property’s value, which means residents pay a median of $1,620 per year. Keep in mind that property tax rates usually vary by county. For example, in Minnehaha County, where Sioux Falls is located, the average tax rate is 1.42%, or $2,062 per year. By Tax-Rates.org’s numbers, that amount is one of the highest in the U.S.
South Dakota does offer a number of programs that can help seniors or those who are disabled shave their property tax bills. Depending on how you qualify, the help comes in the form of tax refunds, reductions, exemptions or an assessment freeze on the value of your home to prevent it from going up.
South Dakota now has a maximum conforming loan limit of $484,350 for a one-unit, single-family home, a rate that is the same for most of the U.S.
Conforming loans are home mortgages that abide by guidelines and limits set forth by Fannie Mae and Freddie Mac. These two government-sponsored enterprises set conforming loan limits, which vary by state and county, each year. Conforming loans are important: By sticking to the borrowing limits of this type of mortgage, consumers who have good credit generally get the best interest rates.
The South Dakota Housing Development Authority can help qualified buyers find a more affordable mortgage and pay down payment and closing costs. Read on for more about individual programs:
This program provides low, fixed-rate mortgages, along with cash assistance for down payment costs.
Who qualifies:
This loan program helps borrowers with down payment and closing costs by providing a second mortgage for up to 3% of the purchase price. The second mortgage charges no interest or associated fees and is paid off either when the first mortgage is paid off or when the borrower sells the home. To see if you qualify, contact a participating lender.
This mortgage credit certificate program provides qualified, first-time buyers with a federal tax credit for a portion of the mortgage interest they pay each year.
Who qualifies:
Shopping around for a mortgage may help you find the financial terms that work best for you and save you thousands of dollars in interest costs over the course of your loan. Here are few tips to get started:
Contact at least three lenders on the same day
Mortgage rates change daily, and vary by lender, so it’s important to contact lenders on the same day and check in with at least three lenders. Reaching out to multiple lenders on the same day will also help protect your credit score; if you make several inquiries within a short period of time, credit bureaus typically recognize you’re shopping for a home loan and won’t lower your score.
Give each lender the same information
Provide each lender with the same information, so you can compare the loan terms you receive in the fairest way possible. This will include telling your lender the potential cost of your new home, your income, the type of loan you’d like and for how long (e.g., a 30-year, fixed-rate loan), your Social Security number (for pulling up a credit report) and the down payment you can afford. Eventually, you’ll also need to provide information such as proof of income, tax returns and statements for any bank, credit and retirement accounts.
Add up all the lender fees to confirm cost
Buying a home is always more than just paying for a mortgage; typically, lenders change a variety of fees, too. These fees include those for processing your loan, recording your mortgage as a public record, closing fees and the cost of hiring an attorney to represent the lender during the buying process. Take all these costs into account when shopping for a mortgage, as fees vary by lender. Also ask lenders to provide you with an annual percentage rate (APR), which will include both an interest rate for your mortgage and any associated lender fees.
Know when to lock in the rate
Ask lenders about their rate-lock policies. These will let you lock in a desirable mortgage rate so you won’t have to pay more if interest rates move up before you close on your purchase. Depending on the lender, borrowers usually have between 30 and 60 days to close before the rate lock expires. By the same token, ask your lender for a possible “float down” if interest rates drop.
The information in this article is accurate as of the date of publishing.