Conventional loans are privately‑insured mortgages that follow the guidelines set by Fannie Mae and Freddie Mac. One of the first hurdles for borrowers is the down payment amount, which varies based on credit strength, loan size, and the lender’s policies.

Minimum down payment percentages

• 3% down – Available to borrowers with strong credit, low debt‑to‑income ratios, and who meet the lender’s eligibility criteria.
• 5% down – The most common minimum for conventional loans when the borrower does not qualify for the 3% option.
• 20% down – Avoids private mortgage insurance (PMI) and reduces the overall cost of the loan.

Acceptable sources of down payment funds

• Personal savings or cash on hand.
• Gifts from immediate family members (parents, grandparents, siblings) that are documented with a gift letter.
• Qualified retirement account withdrawals or rollovers, such as from a 401(k) or IRA, when permitted by the lender.

South Dakota‑specific considerations

• South Dakota has no state income tax, which can leave borrowers with more disposable income for the down payment.
• Most real‑estate closings in the state are handled by attorneys rather than title companies, which may affect closing‑cost calculations.
• The state offers a first‑time‑homebuyer assistance program that can provide down‑payment grants or low‑interest loans, though these funds must meet the lender’s eligibility rules for conventional financing.

This article provides general information about conventional loan down payment requirements in South Dakota and does not constitute personalized financial or legal advice.