You’ve decided to purchase your first home.  Congratulations! Β You will now join the millions of first time home buyers!

This is an exciting milestone in your life, but it can be a little intimidating. Before you start picking out curtains and planning your housewarming party there are several things to review before you start house-hunting.

🚫 No Down Payment Programs for First Time Home Buyers – [WHAT?]

Did you know there are several programs that afford many opportunities to South Dakota’s first time home buyers? Did you know you that you can purchase your first home with no money down? Think this is too good to be true? It get’s even better!

first time home buyers zero down payment programs

Most first time home buyers will never have to pay back the gift funds they received to buy their first home. If this has peaked your interest in anyway, keep reading! To learn more about this program, please reach out to a team member ofΒ RL Real Estate GroupΒ now at 605-212-8431.

πŸ’° Are you a financially prepared first time home buyer?

 Do your homework  before you start the home buying process. Pull your credit report and fix any issues. You can get a free credit report free once a year from the three main credit reporting agencies.

Your credit score is important when buying a home, so you may want to learn more about the credit score needed to buy a house. Write down your budget, including expenses for clothing, gas, groceries, and any other expenses to create a budget that helps build financial stability.

Before you begin talking to lending agents or mortgage brokers,  take inventory of your finances . You should have a savings account of three to six months of living expenses set aside for the unexpected.

hand holding pen with budget figures on paper and calculator nearby

πŸ†“ FREE Credit Counseling

How much home can you afford? Your home loan will depend on your debt-to-income ratio, credit score, and the repayment history for larger installment loans, such as a car or student loan. Typically, lenders will approve about  four to five times your reported income Β for a home loan, although these amounts will vary.

Call or email Christina Ulvestad from First Premier Bank in Sioux Falls. She offers free credit counseling and so much more! Reach Christina at or 605-357-3165.

 What are my first time home buying options if my credit isn’t great?  If your credit is less than average, consider taking a few months to a year to boost your credit score. Working with a reputable credit counselor will also help raise your score organically. However, there still may be a chance you could buy a home with less than perfect credit.

🏑 Sioux Falls First Time Buyers

Home ownership is a big step, and while the market for a first-time home buyer is hot right now, especially the Sioux Falls area, shopping without preparation can lead to frustration and disappointment. Take a look through the guidelines – call RL Real Estate GroupΒ if you have questions! – and determine your home ownership readiness.

Do I qualify as a First Time Home Buyer?
You may be eligible if you have not purchased a home in the last 3 years!

South Dakota first time home buyers have many options and incentives when it comes to securing financing for their dream home.Β  Regan Laughlin and her team can walk with you every step of the way.

South Dakota First Time Home Buyers text next to couple being handed house keys

❓ What is a first time home buyer loan?

First time home buyer loans typically have borrower-friendly loan features like easier approval and down payment assistance. While loans specifically designed for your first home purchase may sound appealing, they may not always a perfect fit.

check box next to I agree with pen

These loans often come with strings attached – which might or might not be deal-breakers. These home buying programs vary depending on where you live and what’s available to you, but the general idea is to provide financial assistance to qualified buyers.

πŸ›‘ What is the limit for first time buyers?

Lending limits for first time home buyers vary by the buyer’s creditworthiness, annual household income, and their income-to-debt ratio. For FHA Loans and other government-sponsored assistance programs, there is a cap on how much you’ll be able to borrow, period.

πŸ’΅ Do I need a down payment on my home?

The rule of thumb for a down payment is about 20 percent of the loan you’re requesting. FHA requires only 3.5% for home buyers as compared to 5% down for conventional buyers. Many people save for a few years before they feel comfortable enough to apply for their first loan, but setting aside a little each pay day can add up quickly.

model home on stacked coins

πŸ€” What is an FHA loan?

If your credit is shaky, you may have more luck with the federal government than a traditional mortgage lender. The Federal Housing Administration has a program that insures the mortgages of many first-time home buyers. As a result of this guarantee, lenders who might otherwise feel uncertain about your qualifications will be more inclined to lend to you.

FHA first-time home buyers loans offer a low down payment, reduced interest, limited fees and the possibility of deferring payments. The Federal Housing Administrations and most states offers these types of loans. The FHA insures lenders against potential default and requires a minimum credit score of 580 or above for a loan with a down payment of 3.5%.

Most lenders require a credit score of 620 or 640 and above to approve an FHA loan. You will need to provide full documentation of your income and assets and meet the lender’s debt-to-income ratio. Typically a maximum of 41% to 43% of your monthly gross income that goes toward the minimum payments on all of your revolving and installment debts.

man and woman looking at clipboard

πŸ™‹ Am I still a first time buyer if I owned a home in the past?

The FHA defines a first-time home buyer as a person who has not owned a home for three years. This includes single parents and displaced homemakers who only owned a house previously with a spouse.

Be careful, however. If you lost your home due to foreclosure, you may not be eligible for an FHA Loan. Your banker will be able to tell you for sure.

🍎 What is a USDA loan?

The USDA (Yes, the food people!) offer home loans, and you don’t necessarily need to buy or run a farm to be eligible. This program focuses on rural areas and incentives settlement in those housing market, such as rural South Dakota.

USDA first time home buyers

The USDA insures the loan, the payments are fixed, and the rates are competitive with what you may find from traditional lending banks. Credit scores 640 and higherΒ  typically streamlines application processing.

With a credit score below 640, you still can qualify for a USDA loan. The lender will ask for extra documentation about your payment history. Keep in mind that there are income limitations, which can vary by region. For more detailed information, check the USDA website and ask your primary banker.

πŸ¦… What is a VA loan?

The U.S. Department of Veterans Affairs (VA) offers a loan program to military service members, veterans, and their families. Similar to the FHA program, these types of mortgages are guaranteed by the federal government.

army man in front of flag

This means the VA will reimburse the lender for any losses that may result from borrower default. The primary advantage of this program is that borrowers can receive 100% financing for the purchase of a home. That means no down payment whatsoever.

πŸ“ˆ Income Guidelines & Purchase Price Limits

Income guidelines can vary and are different from county to county. When calculating income, the first time home buyers program looks at total gross household income.

Keep up to date with information and programs for first time home buyer, they are subject to change.

πŸ†“ What is a First Time Buyers Grant?

Grants are, basically, free money. They require applications like a loan and have restrictions. Unlike a loan, if you fully comply with the terms, you do not have to pay the money back. Fail to comply, however, and you may be subject to financial penalties.

pink piggy bank with glasses beside books and the word Grant

Different economic development agencies have incentives for first-time buyers who meet income, credit, and other criteria. These programs have application processes. When you meet the guidelines, you can receive enough assistance to cover a down payment, and/or reduce the amount of your loan.

🏦 The National Home buyers Fund

The National Home buyers Fund is one of the few multi-state first-time home buyer grants. After you find a participating lender, the down payment assistance program provides up to 5 percent of the loan amount.

This is a non-repayable grant, which means you don’t have to pay it back. This program has income criteria related to FHA, VA, and USDA loans. Check with a participating lender for more information about income requirements and limits – based on your location and housing market.

πŸšͺ HUD’s Good Neighbor Next Door Program

Although not strictly limited to first time home buyers, the Good Neighbor Next Door program from the Department of Housing and Urban Development (HUD) can help you save big on a home. HUD lists eligible properties by state. To be eligible, you must purchase property in an area marked out for revitalization. The idea is to encourage renewal in specific areas.

This program is only open to certain professions, including law enforcement officers, firefighters, emergency medical technicians, and teachers. These properties are often areas of urban blight, rural abandonment, or places where others are reluctant to live. Weigh location against savings before you make your choice. When you commit to living in the property for at least 36 months, you can receive up to 50 percent off the list price of the home.

❓ What are South Dakota’s First Time Home Buyer incentives?

When you are a first time home buyer in South Dakota, there are some specific things for our state to keep in mind. Are you looking specifically at Sioux Falls for your new home? There are some programs, part of Sioux Falls community development, for which you may be eligible.

FHA Loans are available for first time home buyers in South Dakota. There are limits that you may want to check on the FHA Limits List here.

πŸ’΅ What about Sioux Falls special incentives?

In a strategy to encourage Sioux Falls community development, the City of Sioux Falls created the Sioux Falls first time Home Buyers Assistance Program. This program enables first-time homeowners to reach the total needed for a down payment on their first home or to help cover closing costs on a newly purchased home.

One of the requirements to receive the loan is completion of a first time home buyers education program, Homeownership Education Resource Organization (HERO) as defined by the South Dakota Housing Development Authority. These organizations help first time buyers understand what the realities of homeownership will mean for them financially. A certified housing counselor will work with you one-on-one to ensure you are in the best financial position to obtain a mortgage. Lutheran Social Services

🏘️ What is the HERO Housing Program?

Development of The HERO Program helps South Dakota first time home buyers. They offer free resources for first time home buyers to help with education and preparedness. For a first time home buyer in South Dakota, the HERO Program provides home ownership education from certified professionals.

Specifically trained counselors adhere to standards of learning, with the agency’s stated objectives to advance home ownership through high-quality education. Their goal is to improve the overall standard of living for residents of South Dakota by giving South Dakotan’s a better opportunity to achieve and maintain home ownership.

Woman looking at tablet and holding phone

Phew! These folks indeed are heroes for home buyers who don’t know where to start. For more information, their website has an overview of the program and what you can expect from the HERO housing program.

❓ What is the HAPI Down Payment Closing Cost Assistance?

Another program to help rural South Dakota development, as well as keep housing markets in larger cities stable, is the South Dakota’s Homes Are Possible Inc. (HAPI) program. There is one just for Brown County, and then a separate one for the rest of South Dakota – here are the details.

The program’s funds are available to eligible applicants who are interested in purchasing a home, but need financial help to pay the upfront costs. Some financial difficulties include a down payment, closing costs, and prepaid items required to obtain home ownership. These expenses tend to add up substantially and inability to pay might keep people stuck in a renters trap. Applicants must complete a HERO course, and meet eligibility guidelines. I’ve worked with several home buyers in this program with great success – just ask me if you think you qualify!

The research demonstrated that even though first time home buyers are able to make monthly payments on a new home, they may not have enough saved for a down payment. Because of this revelation, the development of HAPI ensued. This award comes in the form of a $3,500 forgivable grant.

πŸ™‹ What is GROW South Dakota?

For more than 50 years GROW South Dakota’s housing, community, economic development programs and services have been serving the needs of local individuals, families, business owners, and entire communities in order to sustain our rural quality of life. GROW South Dakota focuses on helping SD first time home buyers with assistance to buy.

couple selling a house sitting in front of real estate agent at desk

The programs vary by region. For example, Sioux Falls residents could be awarded up to $10,000 down payment/closing cost, or 0% interest deferred mortgage, for the purchase of their owner-occupied principal residence.

Have questions about GROW South Dakota?

There are a lot of terms that your mortgage lender and real estate agent will toss around. Between the loan process, and trying to decide which loan is right for you, many first time home buyers walk out” head spinning”. The GROW South Dakota program for economic development sponsors an affordable housing program. Geared mainly toward first-time buyers in South Dakota.

In fact, in 2015, GROW South Dakota represented one of eight organizations in the Minnesota, North Dakota, and South Dakota region to be awarded the Bush Prize for Community Innovation from the Bush Foundation. This prestigious annual award honors and supports innovative organizations with a track record of making great ideas happen.

πŸ† GROW SD Wins BUSH Prize for Innovation [VIDEO]

πŸ“‘ Promissory Notes, Truth in Lending, and Deeds

 Why is there a mortgage and promissory notes placed on the property ?

Under the guidelines for the Federal Home Loan Bank Program (FHLB), GROW South Dakota requires to place a deed restriction on the property for five years.

 What is the Truth in Lending I received? Do I have to pay this money ?

A Truth in Lending is required if there is a mortgage placed on your property, even though you do not make payments on the loan. It shows what the estimated overall costs are going to be at the final term of the loan. It helps you, as a first-time home buyer, with transparency from your lender, and is required by law for almost all home loans. As far as payments – you are obligated to pay based on the terms of the promissory note and mortgage.

 What happens to the mortgage and promissory note debt if I need to move into a different living arrangement (e.g. nursing home, assisted living, apartment) or if I pass away ?

Although your heirs won’t inherit your debt, they won’t automatically inherit your home as a full asset, either. The deed restriction remains on the property until the property is sold or transferred. At this point, your heirs may choose to pay off the original loan and keep the difference. Or, if the person purchasing the home from them is eligible, that person may have the option to assume the forgivable loan, if that option was on the original deed restriction. If you have more detailed questions, your primary lender can help you work out arrangements as part of your estate planning.

 I am married but my spouse is not listed on the deed, will we both have to sign the mortgage ?

Both husband and wife will need to sign the deed restriction. What if I am divorced but do not live with my spouse and my spouse will not sign the deed restriction? When the program guidelines require a deed restriction be placed on the property, you will not be considered eligible. If the applicant fails to make good on the promissory note, a judgment can be placed on the person.

🏦 What can I expect from the mortgage lending process?

Many sellers won’t entertain an offer unless the buyer has been pre-approved for the mortgage amount.Β Many real estate agents will be unable to help you shop for homes before you’ve spoken with a lender and determined how much you have to spend. There are some first time home buyer incentives, as well as certain steps in a first time home buyers application that your lending agent can help guide you through.

Woman looking at mortgage screen

πŸ™‹Only 5 Questions to Loan Pre-Qualification

 Help! I’m really confused about mortgage terms .

If the application process is making your head spin, you’re not alone. When you’re trying to determine which type of loan is right for you, as well as the impact your home loan will have on your financial future, including retirement, sometimes it’s hard to decide what is best. If you aren’t sure which loan is best for you, or if there is a certain price point you have in mind, here is a handy link for first time home buyers in South Dakota. Every home buyer has their priorities when choosing a mortgage. Some are interested in keeping their monthly payments as low as possible. Others are interested in making sure that their monthly payments never increase. And still, others pick a loan based on the knowledge they will be moving again in just a few years.

 Am I pre-qualified for a loan, or pre-approved ?

Your lender pre-qualifies you for a certain amount. To get pre-qualified, you need to provide some financial information to the bank. Your income and the amount of savings and investments you have. You may also be asked about any outstanding debt. Your lender will review this information and tell you how much they can lend you. This approval will tell you the price range of the homes you can afford. At this point, you can start making appointments with real estate agents. Be prepared to have home sellers hesitate to negotiate until you’re pre-approved for your loan.

 Ok, I got pre-qualified, now I can get pre-approved right ?

Get your docs in a row and be patient – approval can take up to two weeks. Collect pay stubs, bank account statements, W-2s,Β tax returns for the past two years, statements from current loans and credit lines, and names and addresses of your landlords for the past two years. Have all of that paperwork ready for the lender. It may seem like a lot, but don’t be surprised if your lender wants a lot of documentation. At this point, your pre-qualified loan will be evaluated by the underwriters from your lending institution to make sure that you are a stable credit risk. This approval can take time – anywhere from a week to three weeks, so be patient.

🀝 What should I look for in a real estate agent?

When you select your real estate agent, consider them as part of your home-buying team. A savvy real estate agent will understand your family and needs, help guide you to properties that suit (and away from ones that don’t), and have recommendations for other vendors and professionals you’ll need throughout the process.


Be sure to interview more than one real estate agent, and treat the process like you would an applicant applying at your place of business. In reality, that’s what you are doing, so it’s important to take your time and find an agent that you trust.

Ask for References

An important step in choosing a real estate agent is asking about previous clients they have helped.Β  Ask past clients are if they would choose to work with their agent again. Were they are satisfied with the level of service they received?

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Ask about how promptly their phone calls or emails were returned, as well as the ease of communicating with their agent. Outline your expectations at the outset and be very clear about them. If there are a few deal breakers you have, make sure to tell your agent upfront.

Your Real Estate Agent

You can rely on your agent to offer you a more in-depth picture of the housing situation where you live. They use knowledge of the current marketΒ and experience to findΒ neighborhoods that fit your search criteria. One tool RL Real Estate Group can provide to you is a comparison in prices of the homes in the neighborhood or “comps”.

πŸ—ΊοΈ Where do I want to buy my first home?

There’s a lot that goes into deciding where to buy your first home. Deciding to move from a home you own, versus one you rent, is a more complicated process, so there are several things to think about besides the house itself.

 Start touring homes in your price range. .

It might be helpful to take notes (using this helpful checklist) on all the homes you visit. You will see a lot of houses! It can be hard to remember everything about them, so you might want to take pictures or video. This will help you remember each home, and each of your likes and dislikes. When looking for homes on, you’ll have the option to favorite the homes you like best, take a virtual tour, and get details of the home’s history and how long it’s been on the market. While these are great tools, especially the virtual tours, they aren’t a substitute for your realtor. The team at RL Real Estate Group can set up physical tours of your home. give you details that may not be listed on the websites, and tell you more about the neighborhood than you can find out online.

Follow Your Dreams for First Time Home Buyers

 How much will my commute change?  

If my commute time increases, is this something that I am willing to exchange for what my new home’s location offers? Consider driving from your potential new home to work and back during peak travel hours. You may also want to check out public transportation or park-and-ride if you are moving farther from the city center.

 Drive the new neighborhood.  

Explore the neighborhood at night and during the day to get a feel for the community. Look for walking trails, dog parks, and the overall vibe. Remember, it’s not just the home you’ll be living in, but the whole community.

πŸ€” Appraisals and Mortgage Approvals – Am I done with the loan process yet?

Decided on your home and ready to write your offer? Your all done with applications and math? Nope, not yet, There are a few more things that your mortgage lender will ask before they write the check. Lenders want to make sure that their investment (your new home) is sound. A first time home buyer loan is a little riskier than lending to someone who is an existing home owner. Their betting on your ability to comply with terms of a home loan, but don’t give up. When you reached this point, you’re in the home stretch and you’ll be having that first backyard barbecue before you know it.

Mortgage for first time home buyers

 Getting an Appraisal.  

The lender will arrange for an appraiser to provide an independent estimate of the value of the house you are buying. Appraiser are members of a third party company and are not directly associated with the lender. The appraisal will let all the parties involved know that you are paying a fair price for the home.

 How much will my overhead be affected?  

When moving from an apartment into a larger home, you might find your utility bills are higher than you anticipated. Apartments sometimes bundle things like internet, trash collection, or other utilities into the rent amount. Making first-time homeowners have a bit of “sticker shock” whenΒ  paying for all the utilities on their own. Some places may require you to place a deposit for utilities or cable/ internet and other services. If you’ve never had service call before you are ready to opening a new account.

 Paperwork and the Title ,

As you can imagine there is a lot of paperwork involved in buying a house. Your lender will arrange for a title company to handle all of the paperwork. They will make sure that the seller is the rightful owner of the house you are buying. At this point, the lending bank will check for any liens on the home from creditors of the current homeowners. Liens, if found, will be settled before the seller can legally sell you the home.

 Purchase Mortgage Insurance .

Private Mortgage Insurance (PMI)Β  protects mortgage lenders against financial losses due to foreclosure. PMI allows you to purchase a new home with less than a 20% down payment. It allows mortgage lenders to accept lower down payments and is an excellent avenue for getting into your dream home with limited funds available. Nearly half of all borrowers put less than 20% down when buying a home.

πŸ‘ Making an offer and closing for first time home buyers

 When you’re ready to make an offer, make sure that you don’t skip a home inspection. 

Getting a qualified home inspector will only cost a few hundred dollars. If they find things you didn’t during the shopping process, you could save thousands of dollars easily. Sometimes when buying a home from a seller that has lived there for years, there may be issues. Either they simply aren’t aware of, or have gotten used to, and therefore didn’t mention,we need to know. In any market, making your offer contingent on inspection protects you. It gives you a chance to renegotiate your offer or withdraw it without penalty if the inspection reveals significant material damage. I work with a couple of reputable, experienced home inspection professionals and will be happy to give you a referral!

 Inspect your loan terms. 

You’ve probably read so much about lending recently that your eyes are blurry. Before you sign on the dotted line, review the terms of your loan. When getting a HUD- specific loan the best ways to prepare is to thoroughly review your HUD-1 settlement statement. This outlines your exact mortgage payments. The loan’s terms (such as the interest rate and term) and additional fees you’ll pay, including closing costs. Compare your HUD-1 to the good-faith estimate your lender gave you at the outset. Make sure they’re similar and ask your lender to explain any discrepancies.

 What is a title inspection? Do I need to worry? 

Before you can own or “take title” to a home, most lenders will require a title search of public property. They will check records to make sure there aren’t any liens or issues with transferring the property into your name. This is rare, but if something does crop up, it’s better to know that upfront. If the home’s seller has creditor liens placed against the home, the seller will need to pay these off on or before closing. Usually, the seller will have discovered this prior to the closing day. If not your lender will do the title inspection and make both parties aware of any issues. It’s unusual that this comes up so far in the sales process, though.

What do I need to bring to the closing?
Documents that you will need for closing include: 1. Proof of homeowners insurance 2. A copy of your contract with the seller 3. Your home inspection reports 4. Anything the bank required to approve your loan 5.Β A government-issued photo ID Β 6. Down payment
First Time Home Buyers in South Dakota
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First Time Home Buyers in South Dakota
Are you a first time home buyer in South Dakota? Not sure of where to start? Look no further because this complete guide for first time home buyers can help!
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RL Real Estate
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