Alabama is home to Gulf Coast beaches, scenic mountains, civil rights landmarks, and NASA’s research center. If current property trends are any indication, homebuyers see much of the appeal in what the state has to offer, which is driving demand and driving price increases. According to real estate agent Redfin, the average home sales price in Alabama rose over 18 percent between February 2020 and February 2021.
To the First time buyer To keep up, there are programs in place to make home ownership more affordable, including those that come with lower mortgage rates and relaxed credit requirements. Advance payment assistance and a tax break. These programs are overseen by the Alabama Housing Finance Authority.
Alabama First Time Buyer Loan Programs
AHFA Step Up
First-time buyers can take advantage of the Alabama Housing Finance Authority (AHFA) Step-Up Program to get an affordable fixed-rate mortgage. The program allows eligible homebuyers (first time or repeat buyers) to receive a competitive 30 year conventional (HFA Advantage) or FHA loan, as well as down payment assistance. The requirements for participating in the program are:
- Property must be in Alabama
- Income cannot exceed $ 130,600
- Credit score must be 640 or higher
- The debt to income ratio must be 45 percent or less
- Must take a home ownership training course
Alabama Down Payment Assistance
AHFA Step Up deposit assistance
In addition to the 30-year mortgage, the AHFA Step Up program includes the option of a down payment assistance of 3.5 percent for an FHA loan and 3 percent for a conventional loan. The aid funds are available through a 10-year second mortgage. You can pay off both loans with a single payment each month. To qualify, you must be eligible (and participating in) the first Step Up mortgage program.
AHFA grant for affordable income
AHFA’s Affordable Income Grant provides a grant of up to 1 percent of your mortgage to help you pay closing costs. The grant is only available to those on a conventional HFA Advantage loan, not an FHA loan. You can get the grant with the Step Up Down Payment Support as well as a Mortgage loan certificate, to maximize your savings.
The requirements for the grant are the same as the standards of the Step Up program but are different Income limits based on the county where your home is located.
Other Alabama homebuyer assistance programs
Mortgage Loan Certificate (MCC)
In addition to a competitive mortgage rate and down payment support, AHFA also offers first-time buyers a mortgage loan certificate (MCC).
A customer center is a tax credit and equates to up to 30 percent or 50 percent of your mortgage interest in Alabama, depending on the size of your loan, up to $ 2,000 annually – or up to 20 percent of your mortgage interest if your loan is greater than $ 150,001. You can get the tax break right away by revising your withholding tax on your W-4, or get it once a year through your federal income tax return.
You can combine the tax credit with the AHFA Step Up program or another 30-year fixed-rate mortgage available through a participating lender.
- You must be a first time buyer, which means you have not owned a home in the past three years.
- The property must be in Alabama.
- You have to meet Income limits and Purchase price limits.
Other first-time buyer loan programs
In addition to state-level mortgage programs, first-time buyers in Alabama can take advantage of state-supported loans such as FHA, VA, and USDA mortgages to get cheaper rates and terms. You can also ask your mortgage lender about other home loan and assistance options that may be available. For a comprehensive list of loans to consider, see Bankrate’s Loans and Programs for First Time Buyers to lead.
For more Alabama home ownership programs, visit HUD.gov.
When you’re ready to begin your home buying journey, contact a recognized Alabama Housing Finance Authority Mortgage lender can be a good starting point. Note that while AHFA does not offer mortgages directly, the agency works with over 50 credit institutions across the state. It is wise to look around and compare Loan offers from multiple lenders to find the most competitive option for your situation.