The most common way to repay a mortgage loan is to make monthly, fixed payments to the lender. The payment contains both the principal and the interest. For a typical 30-year loan, the majority of the payments in the first few years cover the interest.

Mortgage rates in South Dakota are lower, sometimes significantly, than the national average. The state’s conforming loan limits and FHA limits stick to the standards.

​Because the recurring costs perpetuate throughout the lives of mortgages (exception being PMI), they are a significant financial factor. Property Taxes, Home Insurance, HOA Fee, and Other Costs increase with time as a byproduct of moderate inflation. There are optional inputs within the calculator for annual percentage increases. Using these wisely can result in more accurate calculations.

​Front-End Ratio:  Front-end debt ratio is also known as the mortgage-to-income ratio, computed by dividing total monthly housing costs by monthly gross income. For our calculator, only conventional and FHA loans utilize it. The monthly housing costs not only includes interest and principal on the loan, but other costs associated with housing like insurance, property taxes, and HOA/Co-Op Fee.

Back-End Ratio: Back-end debt ratio is the more all-encompassing picture of a household's ability to serve home loans. It includes everything in the front-end ratio dealing with housing costs, along with any accrued recurring monthly debt like car loans, student loans, and credit cards. This ratio is commonly defined as the well-known debt-to-income ratio, and is used for all the calculations.

Typically an FHA loan is one of the easiest types of mortgage loans to qualify for because it requires a low down payment and you can have less-than-perfect credit. For FHA loans, down payment of 3.5 percent is required for maximum financing, however, the 3.5 percent may be gifted thru the rural development portion at a slightly higher interest rate. Borrowers with credit scores as low as 500 can qualify for an FHA loan.

Borrowers who cannot afford a 20 percent down payment, have a lower credit score, or can’t get approved for private mortgage insurance should look into whether an FHA loan is the best option for their personal scenario.

Another advantage of an FHA loan it is an assumable mortgage which means if you want to sell your home, the buyer can “assume” the loan you have. People who have low or bad credit, have undergone a bankruptcy or have been foreclosed upon may be able to still qualify for an FHA loan.

Note to all Veterans qualifying for VS loans: The guarantee VA provides to lenders allows them to provide you with more favorable terms, including:

• No downpayment unless required by the lender or the purchase price is more than the reasonable value of the property
• No private mortgage insurance premium requirement
• VA rules limit the amount you can be charged for closing costs
• Closing costs may be paid by the seller
• The lender can't charge you a penalty fee if you pay the loan off early
• VA may be able to provide you some assistance if you run into difficulty making payments
  

You should also know that:

• You don't have to be a first-time home buyer
• You can reuse the benefit
• VA-backed loans are assumable, as long as the person assuming the loan qualifies
  

Visit www.benefits.va.gov/homeloans for details.​