Alabama Mortgage Overview
Known as the 'Yellowhammer State,' Alabama
is the 30th largest state in the country. The median home value in
Alabama is around $142,000, making it a great state for first-time homebuyers.
The Alabama Housing Finance Authority has offered
first-time homebuyer programs since the 1980s and has helped almost 75,000
families stop renting and become homeowners. It's a great place to set up roots
for families of all sizes.
Homebuyers in Alabama have many mortgage
options including:
Alabama FHA loans
If you have
less-than-perfect credit or had recent negative credit events, an Alabama FHA
loan is a great solution. With a credit score of just 580 and a down payment of
3.5 percent, you can secure FHA financing, and buy your first (or subsequent)
Alabama home. FHA loans have flexible guidelines, and even borrowers with a
credit score as low as 500 may qualify with a 10 percent down payment.
Alabama VA loans
If you served (or currently
serve) in the military, the Alabama VA loan provides 100 percent financing and
flexible underwriting guidelines. Lenders allow credit scores as low as 620 and
debt-to-income ratios close to 50 percent for veterans who served our country.
Alabama USDA loans
If you are a low to
moderate-income family and this is your first home or you haven't owned a home
in 3 years, the USDA loan may be a good option. You don't need a down payment
and only need a 640 credit score. Its flexible guidelines and low costs make it
great for first-time homebuyers.
Alabama conventional loans
If you have great
credit (660+) and low debt-to-income ratios (less than 36 percent), the
conventional loan is a great option. You only pay mortgage insurance until you
owe less than 80 percent of the home's value and can secure some of the lowest
interest rates.
First-Time Homebuyer Programs in
Alabama
Step-Up Program
Buyers with household income below $130,600
are eligible for the FHA Step Up program and borrowers who make the lesser of
80 percent or less of the Area Median Income or $130,600 are eligible for the
Conventional Step Up program.
The Step-Up Program provides 3 percent or
3.5 percent down payment assistance, as long as you have a 640+ credit score
and 45 percent or lower debt-to-income ratio. You must complete a homebuyer
education course and go through an approved lender.
Affordable Income Subsidy Grant
The Affordable Income Subsidy Grant is in
addition to the Step-Up Down Payment Program and helps cover the closing costs.
Borrowers must not make more than 80 percent of the area's median income.
Borrowers may get up to 1 percent of the loan amount for closing costs. The
amount you receive depends on your income level. Borrowers must meet the same
qualifying requirements as the Step-Up program to qualify.
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