VA Construction Loans in South Dakota

Building a new home in South Dakota with your VA benefit

South Dakota is a good fit for Veterans who want room to spread out. Land is often more affordable than on either coast, South Dakota has no state income tax, and you can build anywhere from a subdivision lot on the edge of Sioux Falls to a few acres in the Black Hills. A VA one-time close construction loan finances the land, the build and the permanent mortgage with one closing: $0 down on loans up to $1 million, no mortgage payments during the 12-month construction period, and a 15- or 30-year fixed rate after that.

My team handles South Dakota VA construction loans from application through closing, starting with a conversation about your plans.

Where Veterans are building in South Dakota

• Sioux Falls area: Sioux Falls, Harrisburg, Tea, Brandon, Hartford and Lennox, the fastest-growing part of the state.
• Rapid City and the Black Hills: Rapid City, Box Elder, Piedmont, Summerset, Spearfish and Sturgis. Ellsworth Air Force Base sits just outside Rapid City, and Camp Rapid is the headquarters of the South Dakota National Guard.
• Eastern South Dakota: Brookings, Watertown, Mitchell, Yankton and Vermillion.
• Central and northern South Dakota: Pierre and Aberdeen, plus small towns with larger rural parcels.

Land, weather and site considerations

South Dakota's climate shapes how homes are built here:

• Deep frost: Cold winters mean footings and foundations have to go below the local frost line, and many homes include full basements. Your builder and local building department will set the depth for your area.
• Wind and snow: Open prairie lots see strong winds and drifting snow. Think about house orientation, a sheltered driveway and how snow will be cleared from a long private road.
• Expansive soils: Some areas have clay soils that swell and shrink with moisture. A soils evaluation helps your builder design the right foundation and drainage.
• Black Hills lots: Slopes, rock and wildfire exposure can add to site work. Defensible space and fire-resistant materials are worth discussing with your builder and insurer.
• Wells, septic and access: Plan for a private well, a septic system and all-weather road access on rural parcels; the minimum property requirements checklist covers what the VA looks for.

Plenty of South Dakota buyers want acreage. That's fine as long as the property is your primary residence and not a working farm or ranch, which VA construction loans don't cover. If you already own the land, the loan can pay off an existing lot loan at closing: see building on land you already own.

South Dakota builders: licensing, taxes and permits

Builder licensing in South Dakota depends a lot on where you build, because cities can set their own contractor licensing rules. The City of Sioux Falls, for example, requires a Residential Building Contractor's License for work on one- and two-family homes and townhomes that needs a building permit, including passing an exam and carrying a bond and liability insurance. Electrical, plumbing and mechanical work each need their own licenses there. Rural areas may have fewer local requirements, so ask your county what applies.

At the state level, contractors who build a home under a construction contract must hold a South Dakota contractor's excise tax license from the Department of Revenue. That tax is part of the contractor's costs, so make sure your builder's fixed-price contract accounts for it.

Permits and inspections come from the city or county. Whatever local rules say, the VA loan requires a builder approved by the lender before closing and a fixed-price contract. VA construction loans don't allow owner-builders or DIY work. Our builder information page covers what builders submit for approval.

Disabled veteran property tax relief in South Dakota

South Dakota exempts $200,000 of the full and true value of the home of a veteran rated permanently and totally disabled from a service-connected disability. The exemption covers the dwelling, garage and lot, and the home must be owned and occupied by the veteran or by an unremarried surviving spouse who receives dependency and indemnity compensation. You apply once with your county director of equalization, by November 1, and the exemption continues until the property is sold or its use changes. The South Dakota Department of Revenue brochure has the details.

With a new build, apply once the finished home is your residence and ask your county about timing. Compare states on our property tax exemption by state page.

Qualifying for a VA construction loan

VA construction loans start at a 620 minimum credit score, and larger loan amounts may need a higher score. The main test is residual income, the cash left each month after the mortgage, debts and estimated living expenses. With no state income tax, more of your paycheck counts toward it, and strong residual income can offset a higher debt-to-income ratio. The VA funding fee is waived for Veterans who receive VA disability compensation.

You won't make payments during construction. Interest on the funds drawn is covered by the interest reserve, which, like the construction management fee, is built into the loan amount and paid by the builder. Read the eligibility guide and the closing costs guide to get ready.

South Dakota VA construction loan FAQs