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- The Alabama Housing Finance Authority offers state-wide assistance programs to cash-strapped homebuyers.
- Those who are eligible can get up to $10,000 in down payment assistance and up to 1% of their loan amount in grants.
- Some of Alabama’s major cities also offer homebuying programs for local first-time homebuyers.
Alabamian first-time homebuyers aren’t on their own when it comes to funding their home purchases; the Alabama Housing Finance Authority (AHFA) has a few different programs that can help them get into a home.
Cash-strapped buyers in Alabama may be eligible for
down payment
assistance, closing cost assistance, and tax credits to help make buying a home more affordable. And if you live in an area that offers it, you may be able to get help from your city or town as well.
Here’s where to find first-time homebuyer programs in Alabama and how to qualify for the programs offered.
Statewide programs for first-time homebuyers in Alabama
AHFA offers three programs to help Alabamians buy a home: Step Up, Affordable Income Subsidy Grant, and Mortgage Credit Certificate. For all three of these programs, you’ll apply through a participating lender to receive assistance.
AHFA Step Up
Alabama’s main homebuyer assistance program, Step Up, is aimed at moderate-income buyers in need of down payment assistance. If you qualify for Step Up, you can get a 30-year fixed-rate mortgage through an approved lender with up to $10,000 in down payment assistance. The mortgage you get can be a conventional, FHA, or VA mortgage.
Step Up’s down payment assistance comes in the form of a 10-year second mortgage that’s combined with your first mortgage, so you’ll pay this assistance back over time.
Here’s how to qualify for Step Up:
- Income: $130,600 or less
- Credit score: At least 640 or 680, depending on how much you earn
- Debt-to-income ratio (DTI): 45% or lower
You’ll also need to complete a homeownership education course to receive assistance. Step Up can only be used to purchase a primary residence. If you qualify, you’ll get down payment assistance equal to 4% of the sales price, up to a maximum of $10,000.
AFHA Affordable Income Subsidy Grant
The Affordable Income Subsidy Grant offers closing cost assistance in the form of a grant, meaning you won’t have to pay back the funds you receive through this program. You may be able to get up to 1% of your mortgage amount in assistance.
The Affordable Income Subsidy Grant can be used in conjunction with the down payment assistance offered through Step Up. But it’s only available to conventional mortgage borrowers. If you get an FHA or VA mortgage with Step Up, you won’t be eligible for this grant.
Here’s how to qualify for the Affordable Income Subsidy Grant:
- Income: No more than 80% of the area median income
- Credit score: At least 640
- DTI: 45% or lower
Like with Step Up, this grant is available only to buyers purchasing a primary residence. You’ll need to complete a homeownership education course as well.
How much assistance you’ll receive will depend on your income. If you earn 50% or less than the area median income, you’ll be eligible for a grant equal to 1% of your mortgage amount. If you earn 80% or less than the area median income, you could get a grant equal to 0.5% of your loan amount.
AHFA Mortgage Credit Certificate
The Mortgage Credit Certificate (MCC) program, which can be used with both of AHFA’s other programs, provides a
tax credit
up to $2,000 per year to homebuyers.
MCCs help you reduce the amount of federal taxes you owe by giving you a tax credit based on the amount you spend on mortgage interest each year.
To qualify for AFHA’s Mortgage Credit Certificate, you need to:
- Be a first-time homebuyer
- Be purchasing a primary residence
- Meet federal income and sales price limits
Your tax credit amount will be equal to a certain percentage of the amount you paid in interest that year. The percentage depends on the size of your mortgage:
- Mortgages of $150,001 or greater: 20%
- Mortgages of $100,001 to $150,000: 30%
- Mortgages of $100,000 or less: 50%
Local programs for first-time homebuyers in Alabama
Homebuying assistance in Alabama isn’t only available on the state level. Here are some programs offered in a few of Alabama’s major cities. If your city isn’t listed here, check with your local housing authority to see what’s available in your area.
Montgomery homeownership program
The Montgomery Housing Authority offers a Homeownership Program that helps housing choice voucher program participants purchase homes and provides mortgage assistance to first-time homebuyers.
If you’re interested in applying for this program or want to learn more, contact the Montgomery Housing Authority.
Huntsville homeownership and down payment assistance programs
Huntsville’s Community Development Department offers a couple homeownership programs to first-time homebuyers who meet income limits.
Its Single-Family HOME Ownership program provides new homes in the Terry Heights and Edmonton Heights neighborhoods to those who qualify. The Down Payment Assistance program provides up to $7,500 in down payment and closing cost assistance.
Birmingham homeownership education
The Neighborhood Housing Services of Birmingham offers a “No Place Like Home” housing counseling program to help renters, buyers, and homeowners. If you’re a Birmingham resident and you’re planning to buy a home, you can access homebuyer education through this program.
Mobile down payment assistance
The City of Mobile offers down payment assistance through its first-time homebuyers program. If you meet the program’s income limits, you could receive up to $10,000 to cover your down payment or
closing costs
. If you’re purchasing a formerly blighted property, you could get up to $15,000. First responders, teachers, and healthcare workers are eligible for up to $20,000 in assistance, or $30,000 for formerly blighted properties.
If you stay in your home for at least five years, your down payment assistance will be forgiven. To qualify, you’ll need to complete a homeownership education course.
Tuscaloosa homeownership program
First-time homebuyers in Tuscaloosa can get assistance through the Tuscaloosa Housing Authority (THA). Its Homeownership Program provides affordable housing to eligible buyers. If you qualify, you’ll make a down payment of $1,000 and go through homeownership counseling. Then, you’ll purchase a home sold by the THA, typically for $99,500.
National programs for first-time homebuyers
Regardless of the state you live in, if you’re a first-time homebuyer struggling with affordability, low down payment mortgages can help make homeownership more achievable.
FHA loans are geared toward borrowers who might otherwise have trouble getting approved for a mortgage, since they have less stringent requirements. On an FHA mortgage, you can put down as little as 3.5%.
If you have
good credit
but are struggling to come up with down payment funds, a conforming mortgage might be a better fit. These mortgages allow down payments as low as 3%.
You might also qualify for a 0% down mortgage, such as a VA or USDA mortgage. VA mortgages are only available to current military members and veterans who meet minimum service requirements. Some surviving spouses may also be eligible. USDA mortgages are available to low-to-moderate income borrowers who live in eligible rural and suburban areas.
If you’re a law enforcement officer, firefighter, EMT, or teacher, you might also want to look into the Good Neighbor Next Door program. This program, offered by the Department of Housing and Urban Development, lets homebuyers purchase a HUD home at a 50% discount. However, inventory is typically extremely limited. As of May 2022, Alabama had only one home listed.
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