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In this blog, we’ll address the common inquiry: Can I buy a house in South Dakota with poor credit and low credit scores? Purchasing a home with less-than-ideal credit in South Dakota might feel daunting, with the buying process seeming nearly insurmountable. However, it’s worth noting that there are mortgage options tailored for individuals with imperfect credit histories.

Can you purchase a house in South Dakota with poor credit and low credit scores?

Yes, you can. Contrary to common belief, a hefty twenty percent down payment isn’t a prerequisite for securing a mortgage in South Dakota. With a credit score of at least 580, you can qualify for an FHA home purchase loan with a minimal 3.5% down payment.

In this article, we’ll delve deeper into these mortgage solutions and guide you on how to acquire your desired property in South Dakota.

By the article’s conclusion, you’ll realize that your credit history may pose less of a hindrance than anticipated. But before we proceed, let’s examine some key facts about South Dakota. In the subsequent sections, we’ll address and explore the FAQs surrounding the prospect of buying a house in South Dakota with bad credit.

Can I Buy a House In South Dakota With Poor Credit

South Dakota is situated in the north-central region of the United States and forms part of the Great Plains. It is named after the Lakota and Dakota Native American tribes and has a significant population of these tribes. By size, it is the seventeenth largest state in the United States.

Despite its vast expanse, South Dakota is the sixth least populated state in the country, offering ample land yet maintaining a sense of spaciousness. Renowned for its excellent public school system, Brookings stands out as one of the best places to reside within the state. With its accolades for family-friendly living, Brookings exemplifies South Dakota’s appeal as a prime location for homeowners.

Regarding population density, South Dakota ranks as the fifth least populous state in the U.S., contributing to its spacious and uncrowded environment. Bordered by North Dakota to the north, Nebraska to the south, Wyoming to the west, Minnesota to the east, Iowa to the southeast, and Montana to the northwest, South Dakota is geographically diverse.

The Missouri River bisects the state, creating distinct social and geographical regions known as East River and West River among residents. Click Here to Buy a House in South Dakota With Poor Credit

Where Is The Best Place To Buy a House in South Dakota?

The majority of South Dakota’s population resides on the eastern side of the state, drawn by its fertile soils ideal for farming. Conversely, the western side of the state is predominantly known for ranching.

As of 2023, South Dakota’s population increased to 919, 318 from 909, 869 the previous year. African Americans comprise two percent of South Dakota’s population, accounting for less than one-fifth of one percent of the nation’s population.

South Dakota’s economy heavily relies on tourism. Additionally, the West River region is home to major tourist attractions such as the Black Hills, a range of low pine-covered mountains, and Mount Rushmore.

What Are The Major Cities in South Dakota?

Can I Buy a House in South Dakota? South Dakota has five major cities. The largest is Sioux Falls, with a population of 189,258. Rapid City follows closely, with a population of 73,942. One notable living destination is Falls Park, renowned for its natural beauty and a prime attraction in South Dakota.

Sioux Falls, the state’s largest city, stands out as one of the most desirable places to reside in South Dakota. Notably, Sioux Falls is famed for its breathtaking Falls Park, a prominent natural landmark in the city. The entire state offers a picturesque landscape akin to paradise, characterized by vast expanses of land.

Sioux Falls, established in 1856, is the oldest and most populous city in South Dakota. Its economy thrives on sectors such as retail, finance, and healthcare. Rapid City, founded in 1876, ranks as the second-largest city, with its economy heavily reliant on tourism and defense spending. These cities contribute significantly to the state’s economic landscape.

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Population of South Dakota

The population in South Dakota consists of less than one million residents. The current population in South Dakota is about 900,000 people, with kids under five years making up 7.3% of the population, 24% under 18 years, and those over 65 making up 14.3% of the total population. Many people who want to live in privacy and not in a congested area will find South Dakota the ultimate place to live.

Unlike other state in the nation, South Dakota is a large state. However, the state is the sixth least populous state in the nation. Many Americans relocate to South Dakota to enjoy the expansive land, gorgeous landscape, privacy, and living without neighbors. It is not uncommon for many residents to live in acreage. Gustan Cho Associates are experts in helping homebuyers in South Dakota buy a house on acreage.

The entire state is sparsely populated where it is not uncommon for residents of the state to live in large acreage parcels. South Dakota has many scenic attractions such as the Black Hills National Forest which is the headquarters to two monuments next to Mt. Rushmore. Mount Rushmore has the monuments of four U.S. Presidents.

The expansive state is attracting many retirees who want to live their retirement in peace and scenic gorgeous landscape with acres of privacy and not noisy neighbors.

Population Growth of South Dakota

Population growth The population growth since the last census in 2020 is 0.98 percent. The growth rate from 2010 to now is 9.5%, representing over 78,000 people.

What Is The Median Income in South Dakota

The median income in South Dakota is lower than the rest of the country. The average salary among wage earners in South Dakota is between $43,498 to $79,847 per year. An income of $540.400 in South Dakota is considered upper class in the state. The cost of living in South Dakota is four percent lower than the national average.

Homebuyers get a lot of house for the money in South Dakota. Everything in South Dakota costs less than the rest of the nation. Everything from food, clothing, utilities, autos, homes, and cost of living is lower than the rest of the United States. You can get a lot of house for the money in the state.

Another good news for homebuyers moving to South Dakota is the cost of living and housing values is lower than the national average. Home values is four percent lower than the rest of the country. Gas, electric, water, and other utilities than the rest of the U.S. Median Income The median household income is $59,800. For context, the national median income is $64,900.

What Is The Tax Rate in South Dakota

Property and sales tax in South Dakota is lower than the rest of the nation. With a sales tax rate of 4.5% percent, the total combined local and state sale tax rate for the state totals 6.40 percent.

South Dakota is a tax friendly state. It is not the lowest nor is it the highest compared to other states. To put the state’s tax rate into perspective, if you are making $100,000 annually, a wage earner will be taxed $22,599. This makes the wage earner getting a net take home paycheck of $77,800 after taxes.

Tax rate The state doesn’t have individual income taxes or corporate taxes. But it has a sales tax rate, which is 4.5%, while the property tax rate across the state averages 1.22%.

Education System In South Dakota

Education There are 159 school districts in south Dakota with 28 colleges. Also, over 33% of the state’s population have some college or associate degree, while 20% have a bachelor’s degree. 9% have attained a master’s degree level of education. The average school expenditure in the state is $12,383.

Economy of South Dakota

Economy The gross domestic product is $48.98 billion, which is a slight increase from the previous year’s GDP. The unemployment rate is also quite low, at 3.3%, compared to the 6.0% in the country.

Weather In South Dakota

Weather The state experiences a temperate continental climate, with four different seasons and precipitation, which ranges from moderate on the eastern side to semi-arid on the western side.

Median Home Prices In South Dakota

Median home prices The typical home value in South Dakota is about $225,000. This is an increase of 15% from the past year’s value.
Cost of living Compared to the rest of the country, the cost of living in the state is 10.7% lower
Renters vs. owners The majority of the population in the state are homeowners, as rentals are not that many and are available for those below the poverty level.

Can I Buy a House in South Dakota With Non-QM Loans

Non-QM loans – this is one of the best mortgage options in the state, with many lenders not focusing too much on the credit score, but on factors such as the borrower’s income flow as well as the down payment. The government doesn’t back these mortgages.

Over 80% of our clients are borrowers who could not qualify at other lenders. We have a national reputation for being able to do loans other mortgage companies cannot do. Gustan Cho Associates has over 210 wholesale mortgage lenders.

Therefore, can be very flexible in terms of the requirements. There are many options under this category of loans, from jumbo loans to 1099 loans, bank statement loans, etc. For Jumbo loans, they exceed the conforming limit of 647,200 USD, and you will be able to get them at an average rate of 3.24%.

Can I Buy a House in South Dakota With FHA Loans For Bad Credit

FHA loans – this is a mortgage that the Federal Housing Administration backs, and it’s ideal for first-time home buyers, largely due to their low qualifying requirements. Many lenders require a credit score of at least 500 to qualify for the mortgage. Remember that the most widely applied credit score for traditional loans across South Dakota is 620. Also, in all 66 counties in South Dakota, the FHA loan limit is 420,680 USD, while the conforming limit is 647,200 USD. Click Here to Qualify For FHA Loan For Bad Credit in South Dakota

What is the Lowest Credit Score You Can Have to Buy a House?

When purchasing a home, the minimum credit score necessary will vary depending on factors such as the type of loan and the lender’s individual requirements. To give some general guidelines, it’s important to consider these factors.

1. Conventional Loans: It is worth noting that for conventional mortgage loans, a credit score of 620 or above is typically the minimum requirement. However, it is important to remember that some lenders may require higher scores, especially if you want to secure the most favorable interest rates and terms.
2. Government-Backed Loans: The Federal Housing Administration states that a credit score of 500 or above can make you eligible for an FHA loan. However, your credit score must be 580 or higher to qualify for the 3.5% down payment.
3. VA Loans: Lending institutions may have unique specifications for VA loans despite the Department of Veterans Affairs (VA) ‘s absence of a minimum credit score requirement. Typically, lenders may necessitate a credit score between 580 and 620.
4. USDA Loans: The U.S. Department of Agriculture (USDA) typically requires a minimum credit score 640 for USDA loans, although some lenders may accept lower scores under certain circumstances.

Although these are general recommendations, lenders may have their own overlays or additional requirements beyond what the government agencies stipulate. Before applying for a mortgage, it may be beneficial to improve your credit score. If your credit score is at or near the minimum, you may face loan terms that are less favorable and higher interest rates.

What is the Income Limit for First-Time Home Buyers in South Dakota?

Income limits for first-time home buyers in South Dakota can vary depending on the program or assistance you’re applying for. However, the South Dakota Housing Development Authority (SDHDA) is one common program that assists first-time home buyers.

To be eligible for SDHDA programs, your household income typically needs to be within a certain percentage of the area median income (AMI) for the county where the property is located and the number of people in the household. The income limits for these programs are based on the AMI.

For example, as of my last update, the income limits for SDHDA’s First-Time Homebuyer Program in 2022 were based on 115% of the area median income. However, these figures can change annually, so checking with SDHDA or a participating lender for the most up-to-date information is essential.

It may be worth exploring all available options. Other local or national programs may be available for first-time home buyers in South Dakota, each with its own income eligibility criteria. Consider consulting with a housing counselor or lender who can provide guidance tailored to your situation.

Can I Buy a House in South Dakota With Low Credit Scores With a VA Loan?

VA loans – this option is available for military veterans and is backed by the Department of Veterans Affairs. Different lenders require varying credit scores for these mortgages. Some won’t even ask for a down payment. As you can see, you still have many mortgage options. Borrowers with bad credit can get qualify and get approved at Gustan Cho associates.

There are no minimum credit score requirements on VA loans. The team at Gustan Cho Associates are experts in helping homebuyers qualify and get approved for VA loans with credit scores d9wn to 500 FICO.

Just be sure of the lender you are approaching, as different lenders have different requirements. Keep one thing in mind, though, with these mortgages, be prepared to pay higher interest rates compared to traditional loans. Now, having answered the funding aspect of your question, let’s take a look at South Dakota’s property market, plus how you can buy a home in the state.

Tips and Advice Buying a House in South Dakota

In this section, we will cover some tips for buying property in South Dakota. Let’s start by stating that the real estate sector in South Dakota, especially its big cities like Sioux Falls and Rapid City. Large cities in South Dakota had home prices skyrocketing in the last two years.

South Dakota, like the rest of the nation, had exploding home values in the past few years. Many homeowners who purchased a home the past few years are sitting on a lot of equity in their homes. Many homeowners have plenty of equity to do a cash-out refinance.

Home values skyrocketed in valuer over a 20 percent increase in the previous year alone. This has partly been attributed to low inventory that resulted in houses selling pretty quickly, often with many offers. Other than the big cities, even the rural areas have tasted this real estate boom, which means the prices have been gradually increasing as well.

Can I Buy a House In South Dakota in a Booming Housing Market

In some of these areas, nobody expected that the property market would ever experience such a boom, to the point where buyers used to negotiate heavily, and property owners didn’t have a choice but to give in since they just wanted to sell the property.

Buying a home in South Dakota is a great investment. Unlike other states, home values in the state has not peaked or skyrocketed like crazy where a correction is imminent.

It is completely different now! Investors have been flocking to the state from across the entire country. For instance, recently, Tzadik Management, a property management company based in Miami, invested 52 million USD in hundreds of property units in Sioux Falls.

Buying a House in South Dakota Versus Other States

And these are not the only investors who have taken notice of the boom, others from California, Maine, New York, and New Jersey have been flocking there too. Regarding property prices,

Many Americans from other states living in big cities are migrating to South Dakota. Governor Kristi Noem has done a great job for the state. The state has a surplus despite being a tax friendly state.

South Dakota has seen unprecedented growth in property prices. A couple of years ago, after the great recession, property prices dropped to about 150,000.  However, since then, the median home value grew by a staggering 47 percent to about 225,000 USD. This growth has been attributed to the improvement of the economy, the introduction of excellent housing, and increasing confidence in the market.

Get a Mortgage Loan Officer To Get Pre-Approved

After you have decided to purchase a home in South Dakota, you need to hire a mortgage loan officer. Gustan Cho Associates is licensed in South Dakota. After one of our loan officers at Gustan Cho Associates qualifies and pre-approves you, you can now hire a real estate agent.

Armed with a pre-approval. you can now shop for homes and enter into a real estate purchase contract. The mortgage process normally takes thirty days. Get Pre-approvable for your mortgage in South Dakota

Shopping For a Home in South Dakota

Now, with that said, here is what to keep in mind if you are planning to buy a house in South Dakota to get a real estate agent. You should get several referrals of realtors from family, friends, co-workers, and make sure you check their online reviews. Get a real estate agent. Once you sort out your mortgage and down payment, the next thing would be to find a real estate agent from the state.

When hiring a mortgage loan officer and realtor, make sure you get along with both of them. The loan officer and the real estate agent should also get along. You should never hire a part-time mortgage loan originator nor a part-time realtor.

The real estate agent understands the local property market perfectly. Remember that they would be your main ally during the entire process, so make sure you hire right. Select the right location – some of the best areas to search for properties include the following:

Can I Buy a House in South Dakota In Sioux Falls?

Sioux Falls – the median property price in this area is about  $205,500, with median rent at $838, and in many cases, the final cost always exceeds the listing price, with homes selling pretty quickly. This tells how vibrant the city’s property market really is. The city offers its residents a dense suburban feel, with many bars, coffee shops, and parks.

The housing market throughout the state of South Dakota remains strong. There is still room for an upsize in prices. Many new Americans are migrating to South Dakota due to the low cost of living, low local and state taxes, and affordable housing.

The population in this town is about 180,900 people. It’s economically and ethnically diversified, with a median household income at around 61,700 USD. On the education aspect, the city has over 66 public schools and 21 private schools, which means that you won’t have to worry about your kids’ education.

Can I Buy a House in South Dakota In Rapid City?

Rapid City – the median home value in this city is 194,100 USD, with the median rent at about $833. The city has a population of 76,500 people and is the second-largest city after Sioux Falls. It has a thriving industrial and tourism sector that creates jobs for many people, with a median household income of about $53,750.

The crime rate is low and educational institutions are in plenty. This is an excellent place for young families and professionals, and many will keep flocking to its property market in the coming months and years.

Can I Buy a House in South Dakota In Madison?

Madison – getting a home in this area is very affordable, as the median home value is about 124,300 USD. The town is relatively quiet and has a population of 7,200 people. The median income is about 54,800 USD, and the crime rate is also quite low. The schooling system in this town is actually what attracts many people as the expenditure on public schools even surpasses the national expenditure per student.

Can I Buy a House in South Dakota In Brandon

Brandon – the median home price in this suburb of Sioux is about $245,500, with the median rent at about $900. It is also a safe neighborhood with some of the best schools in the state, and has an average income of $93,536, with a very low unemployment rate. Brandon has been ranked as the best place to buy a house, raise a family, and even school your kids in South Dakota.

As you can see, having bad credit history should never be a stumbling block between you and your dream of being a homeowner in South Dakota. There are always mortgage options for you! You just need to get the right mortgage broker to consult. And when it comes to the actual buying process, it is as easy as in all the other states. Hire a reputable estate agent and a mortgage broker. Let them take the pressure off you.

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FAQs: Can I Buy a House in South Dakota With Poor Credit

1. Can I buy a house in South Dakota with poor credit and low credit scores? Yes, you can. Despite poor credit, mortgage options in South Dakota cater to individuals with less-than-perfect credit histories. Some lenders offer FHA loans with a minimum credit score requirement 580 and a down payment as low as 3.5%.

2. What credit score do you need to buy a house in South Dakota? The minimum credit score required for conventional loans in South Dakota is usually 620. However, the requirements may differ based on the lender and type of loan. Improved terms and rates are generally offered to those with higher scores, although scores as low as 500 may be accepted for government-backed loans, such as FHA loans.

3. What are the major cities in South Dakota? The major cities in South Dakota include Sioux Falls, Rapid City, Brookings, and Aberdeen. Sioux Falls, the largest city, offers a diverse suburban feel with a vibrant property market. At the same time, Rapid City boasts a thriving industrial and tourism sector.

4. What is the maximum income allowed for first-time homebuyers in South Dakota? Income limits for first-time homebuyers in South Dakota vary depending on the program or assistance you’re applying for. The South Dakota Housing Development Authority (SDHDA) is one common program that assists first-time homebuyers, with income limits typically based on a percentage of the area’s median income.

5. Can I buy a house in South Dakota with bad credit and little money? It is indeed feasible. Certain mortgage alternatives are designed for people with poor credit and limited down payment options. For instance, FHA loans might accept credit scores as low as 500 and mandate a down payment of only 3.5%. Veterans can apply for VA loans that do not necessitate a minimum credit score or down payment.

6. How can I buy a house in South Dakota with poor credit? To buy a house in South Dakota with poor credit, you can explore mortgage options such as FHA, VA, and non-QM loans. Working with a reputable mortgage broker like Gustan Cho Associates can help you navigate the process and find the best mortgage option for your situation.

7. Can I buy a house in South Dakota in a booming housing market? South Dakota’s housing market has grown substantially, making it a popular choice for home buyers. Although the market is thriving, affordable housing options are still available, particularly in cities such as Sioux Falls, Rapid City, Madison, and Brandon.

If you have any questions about buying a house in South Dakota with poor credit or you need to qualify for loans with a lender with no overlays on government or conforming loans, please contact us at 800-900-8569. Text us for a faster response. Or email us at alex@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, on evenings, weekends, and holidays.

This blog about Can I Buy a House in South Dakota With Poor Credit was updated on April 12th, 2024.