First-Time Home Buyer Programs in South Dakota 2026
South Dakota first-time buyer help runs through SD Housing (South Dakota Housing Development Authority), and you reach it through a participating lender. Its First-Time Homebuyer Program is a 30-year fixed-rate loan for buyers who have not owned a home in three years, on homes priced at $410,000 or less. Fixed Rate Plus adds 3% or 5% of the loan as a 0% second mortgage. A Mortgage Credit Certificate worth up to $2,000 a year is also open to first-time buyers, but SD Housing prices loans that carry it on its higher Repeat Homebuyer rate column.
The three-year rule, and the two ways around it
SD Housing defines a first-time homebuyer as someone who has “not owned a home in the past three years”. Two details on its program page loosen that rule:
- A former mobile home does not count against you. If you “owned and lived in a dwelling unit that was not permanently affixed to a permanent foundation (ie; a mobile home), it doesn’t count as previous homeownership.”
- Veterans can ask about a waiver. SD Housing’s page says “Ask your lender about our Veterans Waiver to see if you qualify.” The terms are not printed, so the lender is the one to confirm them.
Targeted areas get a higher price cap and income limit on SD Housing’s chart. Those are Buffalo, Jackson and Todd counties, plus parts of Lyman, Minnehaha, Oglala Lakota and Pennington counties. Their numbers appear in the limits section below.
Four ways to set up the first mortgage
SD Housing does not lend to you directly: it “does not lend money directly to consumers” and uses participating lenders “to qualify consumers and make all mortgage loans”. Through those lenders, the First-Time Homebuyer Program comes in four versions:
| Option | How SD Housing describes it |
|---|---|
| Fixed-Rate | A 30-year fixed loan with “SD Housing’s most competitive interest rate”, no assistance and no points |
| Fixed-Rate Buy Down | Lowers the rate “by paying a 1% discount point at closing” |
| Fixed Rate Plus 3% | Assistance “equal to 3% of your loan amount”; rates “slightly higher than the standard fixed-rate loan” |
| Fixed Rate Plus 5% | “the maximum level of assistance—5% of your loan amount” |
Choosing between these comes down to cash versus rate, and the MCC below is a third trade-off. The plain Fixed-Rate loan carries the best rate you can get without paying a discount point, but no help at closing. Fixed Rate Plus puts cash toward the down payment and closing costs, and SD Housing says the 3% version’s rates run slightly higher than the standard loan.
The Fixed Rate Plus money is a loan, not a grant. SD Housing’s downpayment page puts it as “a second mortgage at 0% interest rate, due-on-sale or satisfaction, no payments, and no additional fees.” You make no monthly payment on it. You repay it when you sell the home or when the first mortgage is paid off or refinanced. Our South Dakota down payment assistance page covers that piece on its own.
SD Housing’s income and price limits for 2026
SD Housing’s current chart sets first-time and repeat-buyer income limits “EFFECTIVE MAY 30, 2026”, by county of residence and family size. SD Housing’s FAQ counts “Annualized gross income from any and all income sources”, including averaged overtime, bonus and commission. A few rows:
| County or area | Family of 2 or less | Family of 3 or more |
|---|---|---|
| Minnehaha, Lincoln, McCook, Turner | $118,700 | $136,505 |
| Brown | $106,400 | $122,360 |
| Counties not listed on the chart | $103,400 | $118,910 |
| Repeat homebuyers or targeted areas | $124,080 | $144,760 |
Purchase price limits on the same sheet date from April 30, 2025. First-time buyers can pay up to $410,000 for an existing or newly built home. For repeat buyers and targeted areas the cap is $460,000. The full county list is in SD Housing’s income limits PDF.
The Mortgage Credit Certificate: first-time buyers only
South Dakota still issues MCCs. SD Housing describes its tax credit as one that “allows qualified homebuyers to claim a portion of their annual mortgage interest as a federal tax credit, capped at $2,000 per year”. Interest left over may still qualify for the mortgage interest deduction. The credit is “an option with the First-Time Homebuyer Program”, and SD Housing’s FAQ says “the Mortgage Credit Certificate (MCC) is not an option with the Repeat Homebuyer Loan Program.”
- Rate trade-off. SD Housing’s rate sheet puts loans with an MCC in the same column as Repeat Homebuyer loans (“REPEAT HOMEBUYERS & Mortgage Credit Certificates (MCC)”). On the sheet effective September 16, 2026, that column was one percentage point above the First-Time Homebuyer column for every loan option, for example 7.125% instead of 6.125% on a government Fixed-Rate loan. Rates change often, so ask your lender to compare the credit with the lower rate.
- Credit percentage. The rate depends on the original loan amount. SD Housing’s brochure (percentages “As of April 28, 2023”) lists 50% of mortgage interest for loans of $150,000 or less, 40% from $150,001 to $250,000, and 30% at $250,001 or over. The $2,000 annual cap applies at every tier.
- Timing. You have to apply through a participating lender together with the mortgage: “Mortgage Credit Certificates cannot be added after closing.”
- Fee. The FAQ lists a “$250 Tax Credit Fee”. The brochure adds that participating lenders “may also charge a fee up to $250”.
- Loan types. The MCC works with conventional, FHA, USDA Rural Development and VA loans. It cannot be used for a refinance, “except in limited qualifying situations”.
- Unused credit. The credit is non-refundable, but “unused portions may be carried forward for up to three years.”
The fine print involves the federal recapture tax, which SD Housing attaches to its First-time Homebuyer loans as well as to the MCC (its FAQ says it “does not apply” to the Repeat Homebuyer program). It can apply if you sell within nine years, at a gain, with a higher income. SD Housing states that for First-time Homebuyer loans closed on or after August 15, 2006, it “will reimburse you for the actual amount of the Recapture Tax paid to the IRS”. You must request the reimbursement in writing by July 15 of the year after the sale.
Credit score, education and the home itself
- Credit. SD Housing’s FAQ says “The minimum credit score for SD Housing programs is currently 620. You will still need to qualify credit.”
- Education. A class is required only on the conventional loans. “At least one borrower/co-borrower must have attended a homebuyer education course when using a conventional mortgage product”, and SD Housing adds that the class “is free”. FHA, VA and USDA borrowers are encouraged to attend but not required. Classes run through HERO (Homeownership Education Resource Organization), and SD Housing counts more than 200 classes a year from HUD-approved agencies, in groups, one-on-one or online.
- Property. Existing homes and new construction both qualify. A manufactured home needs a “Government” insured or guaranteed first mortgage, a permanent foundation, and real-estate tax status. On an acreage, SD Housing finances only the house and the land needed for it. Outbuildings are excluded, and the land “cannot provide a source of income”.
- Occupancy. Turning the home into a rental is generally prohibited: “regulations prohibit this kind of activity with the home that you purchased.” SD Housing will consider temporary renting only in extenuating circumstances while the home is being actively marketed.
- Co-signer. A co-signer who does not take title may sign the note.
If you owned a home recently: Repeat Homebuyer
SD Housing built its Repeat Homebuyer Loan Program for repeat buyers. It also serves “first‐time homebuyers that exceed SD Housing’s First‐time Homebuyer requirements”. The program offers a “Low fixed rate”, down payment and closing cost help, and “Reduced mortgage insurance”. Its limits are $124,080 for a family of two or less and $144,760 for three or more, with a $460,000 price cap and a 620 minimum score. You do not need to have had an SD Housing loan before, “However, if you had a prior SD Housing mortgage, it must be paid off.” The program cannot be used to refinance, and it does not come with the MCC.
The Governor’s House: a home SD Housing sells you
Under the Governor’s House program, SD Housing sells energy-efficient homes built through the Governor’s Inmate Training Program. The two-bedroom model “currently costs $89,000” and the three-bedroom model $99,000, including delivery and placement but not excise and sales tax. The buyer supplies:
- the lot and a building permit;
- the foundation;
- the utility hookups;
- flooring and appliances.
Buyers must “Make $103,400 or less” and stay under net-worth caps. Applicants 61 or younger need a net worth under $125,000, or $105,000 in liquid assets. At 62 or older the caps are $250,000 net worth or $140,000 liquid. SD Housing warns that new orders “will not be ready for delivery for 18 months.”
South Dakota buyer questions
Can I get the MCC and Fixed Rate Plus on the same loan?
SD Housing’s answer is “In many cases, yes.” It sends the case-by-case question to the participating lender.
Do I need a homebuyer class for an FHA loan through SD Housing?
No. SD Housing requires the class only on its conventional products, though it “strongly suggests” everyone attend. The class is free through HERO partners.
Do I have to bank with the lender?
No. SD Housing’s FAQ answers “No” to whether you must have or open an account with the participating lender.
What if I sell the house in five years?
The Fixed Rate Plus second mortgage is due at sale. A First-time Homebuyer loan, with or without an MCC, can also trigger the federal recapture tax if you sell within nine years at a gain with a higher income. SD Housing reimburses it on First-time Homebuyer loans closed since August 15, 2006, if you request it in writing by July 15 of the year after the sale.
For payments and price range, see the mortgage calculator, down payment calculator and affordability tool. Closing costs in South Dakota covers the fees at closing. The Heartland lender roundup has a South Dakota section, and our pre-approval guide covers the next step. Loan-type background is in FHA requirements, the VA loan guide and FHA vs. conventional. Neighboring programs: North Dakota, Nebraska, Montana. Statewide context is in the South Dakota hub and the national overview.