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Last updated: Jul 13, 2024
6.607% APR 30 Year Fixed
$1,560 / month
Rate: 6.375%
Fees: $1,629
Points: 1.792
Pts amt: $4,480
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  • Minimum 620 credit score needed to prequalify
  • 0% down USDA loan for rural homebuyers
  • 97% of borrowers would recommend to friends or family
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Data provided by Icanbuy, LLC. Payments do not include amounts for taxes and insurance premiums. Click here for more information on rates and product details.

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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