Homeownership programs in Alabama in 2022
- The Alabama Housing Finance Authority offers statewide assistance programs for cash-strapped buyers.
- Eligible individuals can get up to $10,000 in down payment assistance and up to 1% of their loan amount in grants.
- Some of the major cities in Alabama also offer home buying programs for local first-time home buyers.
First-time home buyers in Alabam are not alone when it comes to financing their home purchase; 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
financial assistance, assistance with closing costs and tax credits to help make buying a home more affordable. And if you live in an area that offers it, you may also be able to get help from your city or town.
Here’s where to find homeownership programs in Alabama and how to qualify for the programs offered.
Statewide Programs for First Time Home Buyers 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 programs, you will apply through a participating lender to receive assistance.
Alabama’s leading homebuyer assistance program, Step Up, is for moderate-income homebuyers who need down payment assistance. If you qualify for Step Up, you can get a 30-year fixed rate mortgage from an approved lender with up to $10,000 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 repay this assistance over time.
Here’s how to qualify for Step Up:
- Revenue: $130,600 or less
- Credit score: At least 640 or 680, depending on how much you earn
- Debt ratio (DTI): 45% or less
You will also need to complete a homeownership course to receive assistance. Step Up can only be used to purchase a primary residence. If you qualify, you will receive down payment assistance equal to 4% of the sale price, up to a maximum of $10,000.
AFHA Affordable Income Grant
The Affordable Income Grant provides closing cost assistance in the form of a grant, meaning you won’t have to repay any funds you receive through this program. You may be able to get up to 1% of your mortgage amount as assistance.
The Affordable Income Grant can be used in conjunction with the down payment assistance offered by Step Up. But it is only available to conventional mortgage borrowers. If you get an FHA or VA mortgage with Step Up, you will not be eligible for this grant.
Here’s how to qualify for the Affordable Income Grant:
- Revenue: No more than 80% of the region’s median income
- Credit score: At least 640
- DTI: 45% or less
As with Step Up, this grant is only available to buyers purchasing a primary residence. You will also need to complete a homeownership education course.
The amount of assistance you receive will depend on your income. If you earn 50% or less of the area median income, you will be eligible for a grant equal to 1% of your mortgage amount. If you earn 80% or less of the region’s 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 AHFA’s other two programs, offers a
up to $2,000 per year to homebuyers.
MCCs help you reduce the amount of federal tax you owe by giving you a tax credit based on the amount you spend on mortgage interest each year.
To qualify for the AFHA Mortgage Credit Certificate, you must:
- Be a first-time buyer
- Buy a primary residence
- Adhere to federal income and selling price limits
The amount of your tax credit 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 more: 20%
- Mortgages from $100,001 to $150,000: 30%
- Mortgages of $100,000 or less: 50%
Local programs for first-time home buyers in Alabama
Home buying assistance in Alabama is not only available at the state level. Here are some programs offered in some of the major cities in Alabama. If your city is not listed here, check with your local housing authority to see what is available in your area.
Montgomery Home Ownership Program
The Montgomery Housing Authority offers a homeownership program that helps participants in the Housing Choice Voucher program buy homes and provides mortgage assistance to first-time homebuyers.
If you are interested in applying for this program or would like to find out more, contact the Montgomery Housing Authority.
Huntsville Homeownership and Down Payment Assistance Programs
The Huntsville Community Development Department offers a few homeownership programs for first-time home buyers who meet income limits.
Its single-family home ownership program offers new homes in the Terry Heights and Edmonton Heights neighborhoods to those who qualify. The Down Payment Assistance Program provides up to $7,500 down payment and closing cost assistance.
Homeownership training in Birmingham
Birmingham Neighborhood Housing Services offers a ‘No Place Like Home’ housing advice program to help tenants, buyers and landlords. If you are a resident of Birmingham and are considering buying a home, you can access homebuyer training through this program.
Mobile down payment assistance
The City of Mobile offers down payment assistance through its homeownership program. If you stay within the program’s income limits, you could receive up to $10,000 to cover your down payment or
. If you buy a formerly derelict property, you could get up to $15,000. First responders, teachers and healthcare workers are eligible for assistance of up to $20,000, or $30,000 for formerly degraded properties.
If you stay in your home for at least five years, your down payment assistance will be forfeited. To qualify, you will need to take a homeownership education course.
Tuscaloosa Home Ownership Program
First-time home buyers in Tuscaloosa can get help through the Tuscaloosa Housing Authority (THA). Its home ownership program provides affordable housing to eligible buyers. If you qualify, you’ll pay a $1,000 deposit and go through homeownership counseling. Then you will buy a house sold by the THA, usually for $99,500.
National programs for first-time buyers
No matter what state you live in, if you’re a first-time home buyer struggling with affordability, low down payment mortgages can help make home ownership more feasible. .
FHA loans are for borrowers who might otherwise have difficulty getting approved for a mortgage because they have less stringent requirements. On an FHA mortgage, you can put down as little as 3.5%.
If you have
but have trouble finding down payment funds, a conforming mortgage might be a better fit. These mortgages allow down payments as low as 3%.
You may also qualify for a 0% mortgage, such as a VA or USDA mortgage. VA mortgages are only available to current military 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 are a law enforcement officer, firefighter, paramedic or teacher, you may also be interested in the Good Neighbor Next Door program. This program, offered by the Department of Housing and Urban Development, allows buyers to purchase a HUD home at a 50% discount. However, inventory is usually extremely limited. As of May 2022, Alabama had only one house listed.