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Alabama First-Time Homebuyer Programs
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There are few things as emblematic of achieving the American dream as buying your very first home. The process can be overwhelming, however. There’s a lot to manage, and saving up for the costs associated with your dream home may feel daunting.
Thankfully, there is help available for new buyers. In Alabama, first-time homebuyer assistance programs have become a vital piece of the real estate industry. Buyers in the Cotton State have a number of programs meant to help with mortgage and down payment assistance, tax credits and closing costs.
In this article, we will cover:
- Step Up
- Mortgage credit certificates
- Affordable Income Subsidy (AIS) grant
- National first-time homebuyer programs
Alabama first-time homebuyer programs
The Alabama Housing Finance Authority (AHFA) helps turn state residents into homeowners. With Step Up and mortgage credit certificates — two programs available to Alabama residents — plus the ability to connect homebuyers with national programs, the AHFA is the first stop for anyone looking to make a home purchase in the state.
In January 2019, we researched the most current information on first-time homebuyer programs in Alabama, which included reviewing program websites and guidelines from the AFHA. Here’s what first-time homebuyers in Alabama need to know. (Eligibility differs by program.)
You can check mortgage rates in the state of Alabama here.
- Down payment assistance
- Can qualify for as much as 3% down payment assistance via a 10-year second mortgage
- Combined with a 30-year traditional mortgage at a fixed rate
- Assists moderate-income buyers
- Participants must earn less than $97,300, regardless of household size or location.
- Buyer’s debt-to-income ratio must be 45% or lower.
- Buyer’s credit score must be 620 or higher.
- Buyer must complete homeowner education course.
- Limited to loans provided by lenders that participate with the AHFA
- Program is limited to HFA Preferred conventional and HFA loans only.
- Buyers must move into their new home (as primary residence) within 60 days of closing.
How it works
Mortgage credit certificates
- Federal income tax credits
- Reduces the amount of federal income tax borrowers need to pay each year with credits up to $2,000 year
- Amount that a homeowner may save on their taxes is based on a percentage of mortgage interest paid annually
- Helps low- to moderate-income buyers
- Credits can be combined with a variety of loans, including conventional fixed-rate, FHA, VA, USDA Rural Development and privately insured mortgages
- Some buyers may be able to combine with the AHFA Step Up program
- Buyers are subject to income limits set by the U.S. Department of Housing and Urban Development.
- Homes are subject to sales price limits set by the IRS.
How it works
To apply for the Alabama mortgage credit certificate program, buyers will need to work with an AHFA-approved lender, who will help them through the process.
Affordable Income Subsidy (AIS) grant
- Closing cost assistance
- Helps lower-income buyers
- Provides up to $2,500 for eligible buyers
- Buyers are subject to federal income limits, outlined by the Freddie Mac Home Possible Advantage program, noted as at or below 50% of the area median income.
- Buyers with an income between 50.01% and 80% may access up to $1,500 to help defray closing costs.
- Buyers need a credit score of 620 or higher.
- Buyers should have an income-debt ratio of 45% or lower.
- Buyers can only use this grant in conjunction with a federal Freddie Mac Home Possible Advantage conventional loan.
How it works
This program can be combined with other AHFA programs for qualified individuals. To apply, contact a participating lender.
National first-time homebuyer programs
In addition to state assistance programs, there are many national programs that Alabama buyers may be able to take advantage of, depending on income or other criteria.
The United States Department of Housing and Urban Development specifically supports down payment assistance programs in the following areas: Birmingham, Decatur, Jefferson County, Huntsville, Mobile, Mobile County and Montgomery. The international nonprofit Habitat for Humanity also administers homebuying assistance programs in municipalities around Alabama.
You can contact the Alabama Housing Finance Authority directly to find out about homebuyer resources they administer, but you can also check with your local municipality to find out if they’re authorized to administer federal funds.
Find out if you qualify for any of the nation’s first-time homebuyer programs.