Your Step-by-Step South Dakota Buying Guide
- In the state of South Dakota, real estate purchases are completed with the help of a real estate agent, lending expert, title company, or attorney.
- A closing agent is required to complete the transaction and prepare the final documents.
- The buyer and the seller will usually complete the transaction together at the same table.
- South Dakota has unique environmental requirements depending on where the property is located. For example, properties in the eastern portion of the state may have different requirements than the western section.
Phase 1:
The first phase for buying a house in South Dakota is to negotiate the final details of the purchase contract. This is usually done at the same time as Phase 2, which handles the mortgage application.
- Once you have come to terms on a purchase price, an offer will be accepted by the seller and contracts will be signed by both the buyer and seller.
- At the same time, a deposit, known as “earnest money,” will be delivered to the escrow agent or attorney overseeing the purchase. This money should never be given directly to the seller.
- A signed contract can now be delivered to the title company or attorney. This will initiate a title search to make sure the title can be legally transferred to new owners without complications or disputes.
- The buyer will now review and sign off on any disclosures. Disclosures are statements of known issues or potential problems with the property, helping the buyer fully understand exactly what they are buying. A specific document, called the Seller’s Property Condition Disclosure Statement is often used for South Dakota real estate purchases. This is a mandatory step, and it helps create a mutual trust between the buyer and seller.
- Lead-paint disclosures may be required if the home was build before 1978. This disclosure will state whether or not the buyer has knowledge of lead paint used in the home.
- At this point, the buyer can have inspections completed on the property. The exact inspections will vary, but many buyers prefer to have a general inspection, as well as inspections for mold, termites, and other potential issues that are common in South Dakota.
- If issues are discovered during inspections, the buyer can request changes to the contract. The seller then has a chance to counteroffer, and negotiations continue until an agreement can be reached. If no settlement can be reached, the buyer can void the agreement and have their earnest money returned without penalty.
- The buyer may negotiate a home warranty that covers appliances for a certain period, such as six months or a year. This is not always done but it may be requested.
Phase 2: Securing the Mortgage
The mortgage is often the most complex, or at least the most time-consuming, phase of the entire process. Once complete, however, it will allow you to purchase on of the most outstanding homes in South Dakota! This phase takes time, so it’s best to start as early as possible.
- First you will have to complete an application for a mortgage. This can be done on your own or you can work with a mortgage processional.
- The lender will deliver a “Good Faith Estimate” within three days of your application. This will include an estimate of the closing costs for the South Dakota real estate purchase.
- At this point, you’ll need to provide numerous documents to the lender. Each loan is different, but you may need to provide:
- Bank statements for the past several months
- Information on outstanding loans and debts
- Two years of tax returns
- Pay stubs for each borrower listed on the loan
- Contract information on each borrower’s employer
- Financial disclosures, such as marriage licenses, divorce decrees, alimony, and child support. This should include anything you pay or receive.
- Explanation of credit inquiries
- Information on large gifts. Essentially, if the lender sees large deposits in your bank account that are outside of the normal income, they will want information on the cash. If the money is a gift that will be used as a downpayment, you may need to supply a gift letter.
- Repeat or updated information on any of the above.
4. The lender will now render an approval decision. Assuming you are approved, you should receive an approval letter that states the lender’s willingness to support your South Dakota purchase. There will likely be conditions for final approval, including a complete appraisal on the property.
5. Once you have an approval decision, the financing contingency can be removed from the purchase contract. This is a clause in the agreement that says you (the buyer) needs to set up financing within a certain period, and if you don’t the contract is voided. (If you are rejected for financing, this clause is removed and the buyer can walk away without penalty.) Once you have financing approval, however, you can remove this contingency.
6. An appraisal will now be completed. This is an important step for lenders, as they want to know the home they are lending against has significant value. If the appraisal comes back low, changes to the purchase or the loan contract may be needed.
7. You’ll now need to order homeowners’ insurance and provide proof of insurance to the lender.
8. In some cases, hazard insurance may be required. In the state of South Dakota, special storm, tornado, or flood insurance may be needed.
Remember, this is an extensive and time-consuming phase. Start as early as possible and you’ll be able to secure the best financing for your purchase needs.
Phase 3:
Now we are ready to finalize the purchase. In South Dakota, the purchase usually takes place at one table with all parties present. The buyer will sign all documents related to the loan and the purchase, and the seller will sign documents that transfer ownership.
- Before the closing, a title search will need to be completed. This will make sure there are no liens or ownership issues with the South Dakota property.
- A final number for closing costs will be calculated. This is the amount the buyer will need to finalize the purchase, and may include a downpayment, fees, mortgage points, and other costs.
- Just before the purchase, a final walkthrough will be completed. This step will ensure that there has been no damage or changes to the property since it was last seen by the buyer.
- Now the buyer and seller meet together and sign all appropriate documents.
- The buyer will now pay the final funds in their downpayment.
- Changes to the title and the transaction will be recorded with the appropriate South Dakota city or county.
Congratulations! After this process, you are now the proud owner of a wonderful South Dakota property!
South Dakota Conventional Loan Limits
Loan limits for conventional loans in South Dakota are set by the Federal Housing Finance Agency. This group determines the limits on a county-by-county basis, with high-cost areas receiving higher limits to ensure people can still use conventional loans to purchase reasonable houses.
In South Dakota, the entire state is under the base limits. Currently, the limit for a single-family home is $548,250. If you want to purchase a two-unit property in South Dakota, the conventional-loan limit is $ 702,000, while a three-unit property comes with a limit of $848,500. You can also use conventional loans to purchase a four-unit property. In South Dakota, the limit for these properties is $1,054,500.
Remember that these are only the limits for conventional loans, which include government-backed mortgages like FHA and VA loans. However, if you need a larger loan, there are options available, including jumbo loans in South Dakota.
Downpayment Assistance Programs in South Dakota
If you live in South Dakota and want to purchase a home, you may have struggled to generate a downpayment. Fortunately, there are numerous downpayment assistance options, or “DPA programs” that can help you overcome this common barrier.
Statewide Downpayment Programs
Regardless of your location in the state, there are numerous DPA programs available. Here are two examples of statewide downpayment assistance, including one from the state government and another from a nonprofit organization.
SDHDA’s Fixed Rate Plus
Available from the South Dakota Housing Development Authority, the Fixed Rate Plus program offers assistance with downpayment and closing costs that can equal 3% or 5% of the main mortgage loan. Support comes as a second loan with a 0% interest rate.
GROW South Dakota
The nonprofit group known as Grow South Dakota or “GROW SD” offers support that comes as a loan to help with a downpayment. While the loan is not forgivable, there is no interest and payment is deferred. This program usually provides assistance between $5,000 and $10,000.
Major Local Programs in South Dakota
While some programs are available throughout the entire state, others are only available in certain areas. Here are two examples of regional programs that are available to buyers in a specific city, county, or region…
HAPI
Homes Are Possible, Inc., also known as “HAPI,” provides purchase assistance for northeast South Dakota purchases. Support can be worth as much as $5,000. This also comes in the form of a no-interest second loan. The loan, however, does not need to be repaid until you sell the home.
Sioux Falls Home Assistance for Public Safety
Sioux Falls, the largest city in South Dakota, offers public servants a large downpayment program. If you are purchasing a home in the city, meet eligibility requirements, and work as a police officer or firefighter, you may be eligible for as much as $20,000 in downpayment assistance.
Common Requirements for South Dakota DPA Programs
Each program will have specific requirements, but most require that you meet certain income restrictions because they are intended for low- and middle-income earners. The HAPI program, for example, has different restrictions for each county it serves. In some counties the limit is around $70,000.
Other programs will require that you be a first-time buyer, have a solid credit score, or complete homeownership classes. Many also have a maximum purchase price. For example, the Sioux Falls Home Assistance for Public Safety program is limited to purchases of $300,000 or less.
Programs are constantly changing. For up-to-date information on the top DPA programs in South Dakota, contact our staff right away!
