What do buyers and sellers in Sioux Falls need to know about financing, costs, and transaction timelines? Understanding how a home purchase is financed and what it actually costs is one of the most important parts of being a prepared buyer or seller. Craig Bertrand, REALTOR® with Berkshire Hathaway HomeServices Midwest Realty, breaks it down in plain language.

Money questions are the ones buyers most often feel embarrassed to ask. They shouldn't be. Understanding how financing works, what you'll actually pay, and how long each stage of a transaction takes is not just helpful. It's essential to making a confident decision.

This is Part 4 of a 5-part FAQ series. Parts 1 through 3 covered the basics of buying and selling, the search and listing process, and offers and negotiations. Here, we focus on the financial side of a real estate transaction, including what different loan types mean for buyers in the Sioux Falls metro, what closing costs look like in South Dakota, and what sellers can expect to net from a sale.

Craig works with buyers and sellers across Sioux Falls, Brandon, Harrisburg, Tea, Hartford, and the Minnesota border communities of Luverne, Pipestone, and Worthington. These answers reflect what he sees in real transactions every week.

Part 4: Financing, Costs, and Timelines

Q31: What types of home loans are available to buyers in South Dakota?

The most common loan types you'll encounter in the Sioux Falls market are conventional loans, FHA loans, VA loans, and USDA loans. Each has different qualification requirements, down payment minimums, and cost structures.

Conventional loans are the most widely used. They typically require a minimum credit score of 620 and a down payment of at least three percent, though putting down twenty percent eliminates private mortgage insurance (PMI). FHA loans are popular with first-time buyers because they allow credit scores as low as 580 with a 3.5 percent down payment, though they carry mortgage insurance regardless of down payment size. VA loans are available to eligible veterans and active-duty military with no down payment required and no PMI. USDA loans offer zero-down financing for buyers purchasing in eligible rural areas, which includes some communities in the region Craig serves. Your lender will help you identify which loan type fits your situation best.

Q32: How much do I need for a down payment?

Less than most people think. The idea that you need twenty percent down to buy a home is one of the most persistent myths in real estate. Depending on your loan type, you may qualify with as little as zero down (VA and USDA), 3.5 percent down (FHA), or three percent down (certain conventional programs).

That said, a larger down payment does have advantages: it reduces your monthly payment, eliminates or reduces mortgage insurance costs, and can strengthen your offer in a competitive situation. The right down payment amount depends on your financial position, your loan type, and how much cash you want to keep in reserve after closing. Your lender can model different scenarios so you can see exactly how each option affects your monthly cost.

Q33: What is private mortgage insurance (PMI), and can I avoid it?

PMI is a monthly insurance premium that protects the lender, not the buyer, if you default on the loan. It's typically required on conventional loans when the down payment is less than twenty percent. PMI costs vary but generally run between 0.5 and one percent of the loan amount per year, added to your monthly payment.

You can avoid PMI by putting down twenty percent or more on a conventional loan. VA loans have no PMI regardless of down payment. FHA loans carry mortgage insurance for the life of the loan in most cases, which is worth factoring into your comparison if you're weighing FHA against conventional options. Once you reach twenty percent equity on a conventional loan, you can request that PMI be removed.

Q34: What are closing costs, and how much should I budget for them?

Closing costs are the fees and charges associated with finalizing a real estate transaction. For buyers, they typically run between two and five percent of the purchase price. They include lender fees (origination, underwriting, discount points if applicable), third-party fees (appraisal, title search, title insurance, attorney or closing agent fees), prepaid items (homeowners insurance, property taxes, and prepaid interest), and recording fees.

In South Dakota, closing costs tend to be on the lower end of the national range, but they are still real dollars that need to be in your budget. Your lender is required to provide a Loan Estimate within three business days of your loan application, which will outline your expected closing costs in detail. Review it carefully and ask questions about anything that isn't clear.

Q35: Can the seller pay my closing costs?

Yes, in many cases. Seller-paid closing costs, also called seller concessions, are a negotiated term of the purchase contract. The seller agrees to contribute a set dollar amount or percentage toward the buyer's closing costs, effectively rolling that expense into the transaction.

There are limits based on loan type and down payment amount. Conventional loans allow seller concessions of two to nine percent depending on the down payment size. FHA and VA loans have their own limits. Whether asking for seller concessions makes sense depends on the competitive dynamics of the specific transaction. In a market where sellers are receiving multiple offers, asking for concessions may weaken your position. In a slower market or with a motivated seller, it can be a straightforward way to reduce your out-of-pocket costs at closing. Your REALTOR® and lender will advise you on how to approach this strategically.

Q36: What does a seller actually net from a home sale?

Your net proceeds are the sale price minus everything that comes out before you see a check. The main deductions are: your remaining mortgage balance, real estate commission, closing costs on the seller's side (which are generally lighter than the buyer's but still include title fees and transfer costs), any agreed-upon seller concessions, and any repairs or credits negotiated after the inspection.

If you've owned the home for several years and have built equity, the net is usually meaningful. If you bought recently or did a cash-out refinance, the math can be tighter. Before you list, your REALTOR® can run a net sheet that estimates your proceeds based on a likely sale price and current market conditions. It's one of the most useful tools in the pre-listing conversation.

Q37: How does an interest rate affect my buying power?

Significantly. Even a half-point change in interest rate affects your monthly payment and, therefore, how much home you can afford at a given income level. As a rough example, on a $350,000 loan, the difference between a 6.5 percent and a 7.0 percent rate is roughly $115 per month. Over the life of a 30-year loan, that adds up to more than $41,000.

This is why working with a lender early matters. Getting pre-approved when rates are favorable, understanding how rate locks work, and knowing your break-even point on buying down the rate (paying discount points upfront to lower the rate) are all part of making a financially sound purchase. Your REALTOR® can help you connect with local lenders who know the South Dakota market well.

Q38: What is the difference between pre-qualification and pre-approval?

Pre-qualification is an informal estimate of what you might be able to borrow based on information you provide verbally or through a quick online form. It involves no verification and carries limited weight with sellers.

Pre-approval is a formal process in which the lender reviews your income documentation, tax returns, bank statements, and credit report, then issues a conditional commitment to lend up to a specific amount. It tells sellers you're a serious, qualified buyer who has already done the work. In the Sioux Falls market, most listing agents advise their sellers to give significantly more weight to offers accompanied by a pre-approval letter over a pre-qualification letter.

Q39: What happens on closing day?

Closing day is the final step in the transaction. The buyer signs the loan documents and any remaining purchase agreement paperwork, the lender funds the loan, funds are wired or transferred to the appropriate parties, and ownership officially transfers from seller to buyer. The deed is recorded with the county, and you receive the keys.

For buyers, closing typically takes one to two hours and happens at a title company or with a closing attorney. Sellers sometimes sign their documents in advance. You'll want to bring a valid photo ID and any funds required to close (wired or in the form of a cashier's check, as personal checks are generally not accepted for large sums). Your closing agent will provide a final closing disclosure at least three business days before closing that outlines exactly what you owe or will receive.

Q40: What is the full timeline from accepted offer to closing?

For most transactions in the Sioux Falls metro, the timeline from accepted offer to closing runs 30 to 45 days. Here's a general breakdown of what happens in that window:

Days one through five: earnest money is deposited, inspection is scheduled, and the buyer submits a full loan application if not already done. Days five through fifteen: the inspection period runs, findings are reviewed, and any repair negotiations are completed. Days ten through twenty: the appraisal is ordered by the lender and completed. Days fifteen through thirty: the loan moves through underwriting, any conditions are satisfied, and the lender issues a clear to close. Days thirty through forty-five: final walkthrough, closing disclosure review, and closing day.

Cash transactions can close faster, sometimes in as few as ten to fourteen days. Transactions with complex financing or extended repair negotiations may take longer. Your REALTOR® and lender will give you a projected timeline at the start and flag any potential delays early.

FAQ

Who can help me understand the financial side of buying or selling a home in Sioux Falls? Craig Bertrand with Berkshire Hathaway HomeServices Midwest Realty works alongside buyers and sellers across the Sioux Falls metro, including Brandon, Harrisburg, Tea, Hartford, and Minnesota communities like Luverne, Worthington, and Pipestone. Craig helps clients understand their numbers before they commit to anything. Call or text him at 605-951-8421.

Are there any first-time homebuyer programs available in South Dakota? Yes. The South Dakota Housing Development Authority (SDHDA) offers programs including down payment assistance and below-market interest rate loans for qualifying first-time buyers. Eligibility requirements and program availability change periodically, so it's worth checking directly with a local lender who works with SDHDA programs regularly. Your REALTOR® can point you in the right direction.

What is a closing disclosure, and when will I receive it? A closing disclosure is a standardized document your lender is required to provide at least three business days before closing. It outlines every cost associated with your transaction in final, binding form, including your loan terms, monthly payment, and itemized closing costs. Review it carefully and compare it to your Loan Estimate. If anything has changed significantly, ask your lender to explain why before you show up at the closing table.

Know Your Numbers Before You Move

The financial side of a real estate transaction doesn't have to be overwhelming. The buyers and sellers who feel most confident at closing are the ones who asked their questions early and got straight answers.

Call or text Craig Bertrand, REALTOR® with Berkshire Hathaway HomeServices Midwest Realty, at 605-951-8421. Craig serves buyers and sellers across the full Sioux Falls metro and into the Minnesota border communities, and he's ready to help you understand exactly what to expect, financially and otherwise, before you make your move.

This is Part 4 of a 5-part FAQ series. Part 5 covers relocating to the Sioux Falls area, the local market, and working with Craig.