Conventional Loan
Getting a Conventional Loan in South Dakota When You're Self-Employed
Reviewed by the HomeMath editorial team Updated 2026-08-06
Key takeaways
- Minimum credit score: usually 620 for conventional loans
- Down payment can be as low as 3% of the purchase price, but 5%+ is common for self‑employed borrowers
- Required documents: two years of personal and business tax returns, profit‑and‑loss statements, and recent bank statements
- Debt‑to‑income (DTI) limit: generally 45% (some lenders may stretch to 50% with strong compensating factors)
Getting a conventional mortgage while you run your own business in South Dakota is possible, but lenders look closely at the stability of your income and your overall financial picture.
Credit Score and Down Payment
Conventional lenders typically require a credit score of at least 620. A higher score can improve your chances of approval and may lower the interest rate you receive. For self‑employed borrowers, lenders often ask for a larger down payment than for salaried employees – 5% or more of the home’s price is common, although qualified applicants can sometimes qualify with as little as 3%.
Documentation Needed
- Two years of personal federal tax returns (Form 1040) showing adjusted gross income.
- Two years of business tax returns (Schedule C, Form 1120, or the appropriate partnership return) to verify net profit.
- Year‑to‑date profit‑and‑loss statement or audited financial statements if your business is incorporated.
- Recent bank statements (typically the last two months) to demonstrate cash reserves and regular deposits.
- Proof of any additional income sources, such as rental income or dividends.
Debt‑to‑Income Ratio and Other Underwriting Factors
Lenders calculate your DTI by adding up all monthly debt obligations – mortgage payment, car loans, credit‑card minimums, student loans – and dividing that total by your gross monthly income. A DTI of 45% or lower is the standard benchmark for conventional loans. If your DTI is higher, you may still qualify if you have a strong credit profile, sizable cash reserves, or a low loan‑to‑value ratio.
South Dakota Specific Considerations
South Dakota does not levy a state personal income tax, which means your tax returns may show a higher net income compared to states with income taxes. This can be an advantage in the lender’s assessment of your ability to repay. Additionally, most real‑estate closings in South Dakota are handled by attorneys rather than title companies, so you should expect attorney fees as part of the closing costs.
This article provides general information and should not be considered personalized financial or loan advice.
FAQ
Can I qualify for a conventional loan with a credit score below 620?
Most conventional lenders set 620 as the minimum score, but a few may consider lower scores if you have a large down payment, strong cash reserves, and a very low DTI. In such cases, the loan may come with a higher interest rate or require private mortgage insurance.
Do I need a co‑signer if my business income is irregular?
A co‑signer can help if your personal income or credit profile is weak, but lenders will still require the same documentation of business income. The co‑signer’s credit and income will be evaluated alongside yours.
How does South Dakota’s lack of state income tax affect my loan application?
Because there is no state income tax, your federal tax returns reflect your total taxable income without state deductions. This can result in a higher adjusted gross income figure, which may improve your debt‑to‑income calculation.
What’s the difference between a conventional loan and an FHA loan for self‑employed borrowers?
FHA loans typically allow lower credit scores and smaller down payments (as low as 3.5%) but require mortgage insurance premiums for the life of the loan. Conventional loans avoid the upfront FHA mortgage insurance fee and can be more cost‑effective if you meet the credit and down‑payment thresholds.
Can I use retirement savings, like a 401(k), for my down payment?
Yes, many lenders accept a 401(k) loan or a withdrawal for a down payment, provided you can document the transaction and repayment plan. Keep in mind that borrowing from retirement accounts may have tax implications and could affect your long‑term retirement savings.
Estimate your monthly payment →