First time home buyer Alabama information and resources for first time homebuyers to help ease the process of attaining home ownership.
Alabama’s Gulf Coast beaches, picturesque mountains, Civil Rights sites, and NASA research center are all located in the state.
If current real estate statistics are any indication, homebuyers find a lot to like about the state, which fuels demand and drives up prices.
Indeed, according to real estate agency Redfin, Alabama’s median house sale price was up 18 percent year over year as of the end of 2021.
For first-time homebuyers who are struggling to keep up, there are programs available to help make homeownership more reasonable.
This includes those that offer a lower mortgage rate, less lending criteria, down payment aid, and a tax benefit. The Alabama Housing Finance Authority administers these programs.
Alabama initiatives for first-time homebuyers
AHFA Step Up
First-time homebuyers may qualify for a fixed-rate mortgage under the Alabama Housing Finance Authority’s (AHFA) Step Up program.
Eligible homebuyers (first-time or repeat buyers) can obtain a competitive 30-year conventional (HFA Advantage), FHA, or VA loan, as well as down payment help, through the program.
The following are the conditions for participation in the program:
➣ The property must be located in Alabama.
➣ Income cannot exceed $130,600 or 80 percent of the region median income, whichever is less, depending on the loan type.
➣ Depending on the loan type, a credit score of 640 or more is required.
➣ The debt-to-income (DTI) ratio must be less than 45 percent.
➣ Must complete a course on homeownership education
Alabama assistance with down payments
AHFA Step Up aid with down payments
Along with the 30-year mortgage, AHFA’s Step Up program offers up to 4% or $10,000 in down payment assistance, whichever is less.
The aid monies are secured by a ten-year second mortgage. You’ll be able to pay off both loans monthly with a single payment.
You must be eligible for (and actively participating in) the Step Up first mortgage program to qualify.
AHFA Subsidy for Low-Income Families
The Affordable Income Subsidy Grant from AHFA gives a grant equal to up to 1% of your mortgage to assist you in paying closing fees.
The incentive is only offered to those who acquire a standard HFA Advantage loan, not an FHA loan.
To optimize your savings, you can combine the grant with Step Up down payment help and a mortgage credit certificate.
The eligibility requirements for the grant are identical to those for the Step Up program, however the income restrictions vary by county.
Additional aid programs for Alabama homebuyers
Certificate of mortgage credit (MCC)
Along with a competitive mortgage rate and down payment assistance, AHFA offers first-time homebuyers a mortgage credit certificate (MCC).
MCCs are tax credits that in Alabama can equal up to 30% or 50% of your mortgage interest, depending on the size of your loan, up to a maximum of $2,000 each year — or up to 20% of your mortgage interest if your loan exceeds $150,001.
You can take use of the tax cut immediately by amending your W-4 withholding, or you can take advantage of it once a year by filing your federal income tax return.
The tax credit may be combined with AHFA’s Step Up program or with any other 30-year, fixed-rate mortgage available through a participating lender.
To be qualified:
➣ You must be a first-time homeowner, which means you have not bought a house in the preceding three years.
➣ The property must be located in the state of Alabama.
➣ You must adhere to income and buying price restrictions.
Other lending options for first-time homebuyers
Along with state-level mortgage programs, Alabama first-time homebuyers can take advantage of government-backed loans such as FHA, VA, and USDA mortgages to secure more favorable rates and terms.
Additionally, you can inquire with your mortgage provider about other possible home loan and help choices.
To view a comprehensive list of available loans, read Bankrate’s guide to first-time homebuyer loans and programs.
Visit HUD.gov to learn about additional Alabama homeownership initiatives.
First Time Home Buyer Alabama Getting Started
If you’re ready to begin your homebuying journey, an Alabama Housing Finance Authority-approved mortgage lender may be a smart place to start.
Bear in mind that, while AHFA does not directly offer mortgages, it collaborates with over 50 lending institutions around the state. It’s prudent to shop around and compare loan offers from multiple lenders to see which choice is the most competitive for your scenario.
What credit score is needed to purchase a home in Alabama?
Most Alabama FHA lenders will require that you have at least a 580 credit score. However, we work with a few lenders that will go down to a 500 credit score. Down Payment – The standard down payment requirements for a FHA loan is 3.5% of the purchase price.
How can I buy a house with no money in Alabama?
Buyers who qualify for VA or USDA loans can purchase a home with no money down. Other loan options, such as some conventional and FHA loans, have low down payment requirements — 3% and 3.5%, respectively. Additionally, eligible borrowers can combine down payment assistance with these loans to get 100% financing.
What is FHA loan limit in Alabama?
Alabama homebuyers looking for the flexibility of a loan backed by the Federal Housing Administration (FHA) can borrow up to $420,680 for a single-family home in any county within the state.
Is an FHA loan good?
Generally speaking, FHA loans might be a good fit if you have less money set aside to fund your down payment and/or you have a below-average credit score.
How long does it take to get approved for an FHA loan?
The typical timeline from application to closing with an FHA loan ranges from 30 to 45 days. During this time, your loan file goes through underwriting. The underwriter takes a closer look at your application and reviews supporting documents to ensure you meet the minimum guidelines for FHA financing.
What is the minimum credit score for an FHA loan?
Minimum FHA loan credit score requirement The minimum credit score to qualify for an FHA loan is 580 with a down payment of 3.5 percent.
What is the highest FHA loan amount?
Generally, the most you can borrow with an FHA loan is $420,680. That applies to single-family homes, with limits increasing for 2-, 3-, and 4-unit properties and in higher-cost counties. The maximum FHA loan amount for a 1-unit property in a high-cost area is $970,800.
What would disqualify you from getting an FHA loan?
There are three popular reasons you have been denied for an FHA loan–bad credit, high debt-to-income ratio, and overall insufficient money to cover the down payment and closing costs.
Is it better to go FHA or conventional?
A conventional loan is often better if you have good or excellent credit because your mortgage rate and PMI costs will go down. But an FHA loan can be perfect if your credit score is in the high-500s or low-600s. For lower-credit borrowers, FHA is often the cheaper option. These are only general guidelines, though.
Which loan is best for first time home buyers?
An FHA loan has lower down payment requirements and is easier to qualify for than a conventional loan. FHA loans are excellent for first-time homebuyers because, in addition to lower up-front loan costs and less stringent credit requirements, you can make a down payment as low as 3.5%.
Is it a good time to buy a house in Alabama?
November to January are good times to start looking for a home, if budget is your main concern. But it should also be noted that as the year goes on, the supply of homes also gets bigger. So, while it may be that you can find homes at lower prices in the winter, there is also less selection.
What are the qualifications to buy a house in Alabama?
Your credit score is one of the most important parts of buying a house. This means that it’s the first thing you should check when you are determining your financial situation. To qualify for a conventional mortgage in Alabama, your credit score should be 620 or higher.
How does hardest hit Alabama work?
HHA provides short- term mortgage payment assistance to those who have lost employment or income due to COVID-19. The application portal will reopen Monday, July 6 at 8 a.m. HHA is a foreclosure prevention program that helps eligible homeowners facing temporary financial hardships keep their home.
How old do you have to be to get a mortgage in Alabama?
Minimum Age It varies by state law, but it’s 18 in most states, according to US Legal. The exceptions are Alabama and Nebraska, where’s it’s 19, and Colorado and Mississippi, where it’s 21, according to Law Library. Lenders won’t give you a mortgage until you can be held to the agreement.
Do I need an attorney to buy a house in Alabama?
Alabama is one of the few states that requires a licensed real estate attorney to draft and prepare all legal documents involved in a real estate transaction (Ala. Code § 34-3-6(c)).
What is a step up mortgage?
A step-up loan is a kind of home loan, which offers varying EMIs spread over the loan’s tenure. During the initial years of the tenure of a step-up loan, the EMIs are small.
What is Alabama Step Up program?
Step Up is a homeownership program designed specifically for moderate-income home buyers who can afford a mortgage but need help with the down payment. The down payment funds are secured by a 10-year second mortgage and are combined with a 30-year, fixed-rate first mortgage.
How do I apply for Section 8 housing in Alabama?
Public Housing and Housing Choice Vouchers (Section 8) To apply for either type of help, visit your local Public Housing Agency (PHA). Some PHAs have long waiting lists, so you may want to apply at more than one PHA. Your PHA can also give you a list of locations at which your voucher can be used.
What FICO score is good to buy a house?
A conventional loan requires a credit score of at least 620, but it’s ideal to have a score of 740 or above, which could allow you to make a lower down payment, get a more attractive interest rate and save on private mortgage insurance.
How much is average house deposit?
Usually, you need to put down a deposit of at least 5% of the property’s value. This will mean you have a 95% LTV mortgage. Coronavirus has led to most lenders only accepting deposits of at least 10%. This made it harder to get a mortgage with a deposit of just 5%.
