South Dakota FHA Loans

An FHA loan is a type of home loan designed to make homeownership more attainable for more borrowers. Backed by the Federal Housing Administration (FHA), these loans allow lenders to offer more favorable terms to borrowers because the government insures the loan, reducing the risk for the lender.

This insurance means you can get a low income mortgage whether you’re a first-time home buyer in South Dakota or someone with less than perfect credit because the FHA will cover the lender’s losses if you default on the loan. As a result, lenders can offer lower down payments — as low as 3.5% of the home’s purchase price — and more flexible credit requirements compared to a conventional South Dakota mortgage.

FHA loans also have competitive interest rates, making them an attractive option for almost any home buyer in South Dakota and across the United States.

South Dakota FHA home loans offer numerous advantages for home buyers. Key benefits of these loans include:

• Low down payment requirements: FHA loans allow you to purchase a home with a minimal down payment of just 2.5%. This lower requirement makes homeownership more accessible for those who haven’t had the opportunity to save a large sum for a down payment.
• More lenient credit requirements: While conventional loans often require higher credit scores, FHA home loans in South Dakota are more forgiving. Credit scores as low as 580 mean you can qualify for the 3.5% down payment option, but if you have a higher down payment of 10%, you can qualify for the loan with a credit score of just 500.
• Competitive interest rates: Due to government backing, lenders can offer competitive rates on these loans. However, your actual interest rate can depend on many factors and will vary depending on your unique financial situation.
• Ability to finance closing costs: FHA loans in South Dakota allow borrowers to finance certain closing costs by including them in the loan amount. This feature can be particularly helpful for buyers struggling to come up with upfront cash.
• Assumable: FHA loans are assumable mortgages, so a future buyer can take over your mortgage with its existing interest rate and terms.

FHA loans in South Dakota come with certain requirements borrowers must meet. South Dakota FHA loan requirements include:

• Credit score minimum: FHA loans come with more lenient credit requirements, but a minimum credit score is still necessary. If you have a 500-579 credit score, you’ll still be eligible for the loan but require a down payment of 10%. For the option to put only 3.5% down, you’ll need a credit score of 580.
• Down payment amount: As we’ve discussed, you’ll need to make a minimum down payment of at least 3.5% of the home’s purchase price, depending on your credit score. This low down payment requirement is one of the most attractive features of South Dakota FHA loans.
• Debt-to-income (DTI) ratio: Generally, FHA loans allow a front-end ratio (household expenses) of up to 31% of your gross monthly income and a back-end ratio (all debts) of up to 43%. However, compensating factors may allow for higher ratios.
• Property standards: The property you’re purchasing must meet FHA minimum property standards. This ensures the home is safe, secure, and sound. An FHA-approved appraiser will inspect the property to ensure it meets these standards.
• Mortgage insurance: All FHA loans require borrowers to pay mortgage insurance premiums (MIP), which include an upfront and annual MIP. The upfront MIP of 1.75% of the loan amount can be financed into the loan, while the annual premium will vary based on loan terms and amount.

FHA loan limits are the maximum amount a lender can give you to purchase a home. These limits are set to ensure that FHA loans remain available for different types of borrowers. In South Dakota, the FHA loan limit for a single-family home is $498,257.

Applying for an FHA loan is similar to applying for a conventional loan, with a few exceptions. Here’s a look at the steps:

1. Check your eligibility: Review the FHA loan requirements to ensure you meet the basic criteria before proceeding. Need help managing your finances to see if you qualify for an FHA loan? Download the Griffin Gold app to get a comprehensive view of your financial situation and determine if you’re ready to buy a house.
2. Find an FHA-approved lender and get pre-approved: Research and choose a lender in South Dakota that’s approved to offer FHA loans. Compare different lenders to get the best deal. Once you’ve chosen a lender, get pre-approved to show you exactly how much you can afford to spend on a house.
3. Submit your loan application: After you’ve gone house hunting and made an offer, collect the paperwork you’ll need when it’s time to fill out the mortgage application. This includes proof of income(W-2s, tax returns, and pay stubs), bank statements, identification, and information about debts and assets. Then, fill out and submit your mortgage application.
4. Undergo underwriting and close on the loan: The lender will review the information on the application, order an appraisal, and make a decision. If approved, you’ll receive a closing date. Review all final documents carefully before signing and completing the home purchase.

FHA loans in South Dakota can help many borrowers achieve their dreams of homeownership. With their accessible down payment options, lenient credit requirements, and competitive rates, these loans open doors that might otherwise remain closed.

As an experienced FHA-approved lender, Griffin Funding specializes in guiding borrowers through the qualification process and helping them determine if an FHA loan is the right option. Reach out to learn more or apply now to take the first step on your homeownership journey.