Programs In Alabama That Help First-Time Homebuyers

Nov 06, 2023 By Susan Kelly

Alabama has many different attractions, including its Gulf Coast beaches, picturesque mountains, Civil Rights sites, and the NASA research complex. If recent real estate activity is any indication, purchasers find plenty to like about this state, which is pushing up demand and prices.

There are programs designed to help first-time buyers get into their own homes by reducing the costs associated with doing so, such as those that offer reduced mortgage rates, more lenient lending standards, down payment assistance, and tax credits.

Funding Options For Alabama's First-Time Homebuyers

AHFA Step Up

The first time home buyer programs Alabama Housing Finance Authority (AHFA) Step Up program helps first-time homeowners in the state secure a fixed-rate mortgage. The program offers first-time and repeat purchasers the chance to receive down payment help and a competitive 30-year conventional loan, FHA loan, or VA loan. The following are some of the prerequisites for the program:

  • The location of the property must be alabama first time home buyer programs.
  • Income must be more than $130,600 or 80% of the region's median income, and this percentage varies by loan type.
  • A minimum FICO credit score of 640 is required
  • Maximum 45 per cent DTI ratio
  • Complete homeownership education Alabama down payment assistance

Help With The Down Payment From The AHFA Step-Up program

With AHFA's Step Up program, you may get a 30-year mortgage and down payment assistance of up to 4% of the purchase price, or $10,000, whichever is less. A second mortgage with a 10-year repayment period is the source of the assistance funds.

It's possible to consolidate the payments for both loans into one manageable monthly instalment. To be eligible, you must be enrolled in the Step Up program for first mortgages.

Assistance for Low-Income Americans

The Affordable Housing Finance Agency offers a grant of up to 1% of the mortgage to assist with closing fees. To qualify for the incentive, borrowers must get a conventional HFA Advantage loan rather than an FHA loan.

You may optimize your savings by combining the grant with Step Up down payment aid and a mortgage credit certificate. The grant's conditions are identical to those of the Step Up program, albeit the maximum allowable income varies by county.

Additional Alabama First-Time Homebuyer Programs

Certificate of Credit for a Mortgage

First-time buyers can get a mortgage credit certificate from AHFA in addition to low-interest rates and help with the down payment.

A mortgage credit certificate in Alabama can be worth up to $2,000 per year, or up to 30% or 50% of your mortgage interest up to a total of $150,000.

A tax credit can be obtained immediately by adjusting withholding on a W-4 or annually by filing a federal income tax return. The tax credit can be used with AHFA's Step Up program or another 30-year fixed-rate mortgage from a participating lender.

To qualify:

  • You can't be a repeat buyer; you can't have owned a property in the past three years.
  • Alabama property.
  • Income and price constraints apply.

Different Loan Programs for New Homeowners

First-time homebuyers in Alabama can access various mortgage options, including state-run programs and federally-backed loans like FHA, VA, and USDA mortgages. Your mortgage provider may also point you toward alternative lending and assistance programs. If you'd like to see all the available financing options, click here.

Funding For First-Time Homebuyers In Alabama

You can borrow up to the lesser of 4% of the purchase price of your new home and $10,000 under the AHFA's Down Payment Assistance program. However, you should expect something other than a grant or a repaid debt here.

This is a second mortgage with a 10-year repayment period that runs in tandem with your primary loan. Make sure you can afford both loans with the aid of your cooperating lender. But everybody who applies for and is approved for a Step Up mortgage should receive this assistance.

Cash Assistance for Low-Income Families

Those with especially little means may be eligible for supplementary, interest-free home-buying assistance. Your income will determine whether it's 1% or 0.5% of the total loan amount. The American Housing Finance Agency (AHFA) can lend you up to roughly 5% of the price of your future house.

Certificate of Credit for a Mortgage

Mortgage credit certificates are available through the AHFA, and they can lower your annual federal tax liability by up to $2,000. You may still benefit from these advantages even if you choose the larger "standard deduction" on your tax return. 1

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