Considering the search for your new home? House-shopping in South Dakota offers potential buyers a lot of options. Take advantage of the services the South Dakota Housing Development Authority (SDHDA) and its partners offer. Our services help ensure you are comfortable with all the steps leading up to purchasing a house.
Here are three steps you should consider—especially if you're a first-time homebuyer.
The Homeowner Education Resource Organization (HERO) is an organization that provides prospective homebuyers with the education they need before buying a home. Resources are specifically designed for South Dakotans, meaning attendees will be given information they need to purchase a house here in our state. Some of the topics these classes cover include financing and the mortgage process, shopping for a home, preparing for homeowner responsibilities and much more.
HERO is a great resource if you want to know all the ins and outs of buying a home to feel confident when going through the process. These classes are offered for free across the state throughout the year, so be sure to find a class in your area and sign up to get a base understanding about the homebuying process.
Calculate What You Can Afford
One of the most disappointing things when looking for a home is finding your perfect house—and it's way outside your price range. Searching before you budget can make your homebuying process disappointing. Before starting your house search, make sure you determine a price range you can afford and restrict yourself to looking for houses in that range. If you’re unsure how to calculate an ideal price range for a house, check out our Mortgage Payment Calculator. All you need to do is enter mortgage terms, amount, taxes, insurance and interest rates for your potential mortgage, and you will get a breakdown of how much your monthly payments would theoretically cost.
But what if you're not sure how to set your monthly housing budget? Try to keep your monthly housing costs below 28 percent of your monthly gross income. The costs should include your mortgage payments, property taxes, insurance and other related fees. For example, a person making $50,000 a year should spend no more than $1,166 a month on housing costs. If you follow this guideline, you and your budget should be sitting more comfortably in your new home.
Determine your DownPayment
Once you've selected the ideal mortgage, start thinking about the downpayment on your future home. Lenders usually require a downpayment of at least three percent for many first-time homebuyers in South Dakota, but it can sometimes be higher, depending on your home loan of choice. When purchasing a house, you pay the seller the downpayment and borrow the remaining amount needed to purchase the house.
For example, if you are purchasing a $100,000 house and you are asked to pay a three percent downpayment, you will pay the seller $3,000 and borrow the other $97,000—that's your mortgage amount. If you choose to pay a higher downpayment upfront, you'll need to borrow less. If you cannot afford a downpayment, check out our Downpayment and Closing Cost Assistance program. If you qualify, you could receive as much as three percent as a gift to help with the cost of your mortgage.