South Dakota home buying: monthly costs, property tax and SD Housing loans

#How South Dakota compares

Prices sit below the national median, and the median home costs 3.8 times the median household income. Two figures stand out. Rent is the 8th-lowest of the 50 states and DC, which makes renting a real alternative, and the effective property tax rate is the 18th-highest, which pushes up the cost of owning.

#Monthly cost of the median South Dakota home

Insurance in the example uses Freddie Mac’s national average premium per $1,000 of value. Hail and wind exposure can push South Dakota quotes above that, so get a quote before you make an offer. To change the inputs, open the mortgage payment calculator with South Dakota’s figures filled in.

#What a South Dakota income supports

The median household in South Dakota earns $76,881. Following Freddie Mac’s suggestion to keep housing under 30% of gross income gives a monthly budget of $1,922. With 10% down at today’s average rate and South Dakota’s tax ratio, that supports a price of about $245,000 — $44,600 short of the median home value. A larger down payment, a less expensive home or a second income are the usual ways to close that gap; the affordability calculator shows the price at several debt-to-income limits.

#SD Housing’s Fixed Rate Plus loans

The South Dakota Housing Development Authority offers 30-year fixed-rate first mortgages through participating lenders, plus a Fixed Rate Plus version that adds down payment and closing-cost help equal to a share of the loan amount — up to 5%. The help is a second mortgage at 0% interest with no monthly payments and no added fees, due when you sell or pay off the first loan. Rates on the Plus loans run slightly higher than the standard fixed rate.

For the first-time homebuyer program, you must not have owned a home in the past 3 years, your income must be within SD Housing’s limits and the price must be $410,000 or less — so a home at the state median value fits under it.

#South Dakota property tax: above the national ratio

Census figures put the median South Dakota homeowner’s bill at $2,940 a year. As a rule of thumb, every $100,000 of home value costs about $85 a month in property tax at the state’s effective rate. The bill on a specific house depends on its county, city and school district levies and on how the county assessor values it, so ask for the seller’s latest tax statement. If your lender escrows taxes, a change in the levy shows up in your payment after the annual escrow review.

#Closing costs and the South Dakota transfer fee

South Dakota charges a real estate transfer fee of 0.1% of the value — about $290 on the median home. South Dakota charges no state tax for recording the mortgage. The rest of your closing costs come from the lender, title company and prepaid taxes and insurance; the CFPB’s typical range of 2%–5% of the price comes to $5,792–$14,480 here. Estimate yours in the closing cost calculator.

#Renting or buying in South Dakota

The median South Dakota rent of $999/mo is below the national $1,487/mo, and it is $1,272 a month less than owning the median home with 10% down — before repairs. Buying pays off when you stay long enough for equity and price growth to outrun the monthly difference and the costs of buying and selling. The rent vs buy calculator opens with South Dakota’s median price and rent so you can find that break-even year.