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Alabama First-Time Home Buyer Programs of 2018

July 12, 2018
Finding the Right Mortgage, Mortgages
Alabama First-Time Home Buyer Programs of 2018
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If you’re a first-time home buyer and Alabama is your sweet home, you’re in luck. National programs are available to make owning a first home more affordable. And, since 1980, Alabama Housing Finance Authority has helped more than 70,000 families — many of them first-time home buyers — afford a home through its loan programs.

Here’s what to know about national and state programs available to Alabamians and what you need to qualify.

National first-time home buyer programs

These national mortgage programs may be used by first-time home buyers to make home-owning more affordable in any of the 50 states.

Conventional mortgage

National program

Best for

Low down payment

Limited mortgage insurance premiums

What you need to know

First-time home buyers can get a conventional home loan with as little as 3% down if the mortgage meets requirements set by Fannie Mae and Freddie Mac. And if you put at least 20% down, you won’t have to pay mortgage insurance. Most lenders require a minimum credit score of 620 to qualify for a

 

FHA loans

National program

Best for

Low credit score

Low down payment

What you need to know

Mortgages insured by the Federal Housing Administration, or FHA, offer relaxed qualification requirements, especially when it comes to down payment and credit score. You can qualify for an FHA home loan with a credit score as low as 500, but you’ll need a 10% down payment. If your score is 580 or

 

VA loans

National program

Best for

Military

Low down payment

What you need to know

Guaranteed by the U.S. Department of Veterans Affairs, these mortgages are available to military members, veterans and surviving spouses. If you qualify, you’ll see benefits such as no minimum credit score and no down payment or mortgage insurance, but you'll likely have to pay a VA funding fee.

 

USDA loans

National program

Best for

Low down payment

Rural

What you need to know

The USDA home loan program encourages rural and suburban homeownership by offering zero-down-payment mortgages to lower-income buyers. Borrowers with nontraditional credit data, like rent or utility payments, can still apply, but those with a score of 640 or above will experience faster loan

 

Alabama first-time home buyer programs

AHFA offers first-time and repeat home buyers affordable home loans for buying a new or existing home, but not for refinancing. Down payment assistance programs eliminate the need to save for a big cash down payment. Reduced mortgage insurance payments may also be possible. And Mortgage Credit Certificates cut your federal income tax, leaving you more income to apply toward qualifying for a mortgage.

AHFA highlights and eligibility requirements

HIGHLIGHTS

  • 3% down payment assistance.
  • Mortgage insurance discount with a conventional loan.
  • Federal tax credits available.

ELIGIBILITY

  • 620 minimum credit score.
  • Income and purchase-price limits apply.
  • Move in within 60 days after closing.

» MORE: Tips for first-time home buyers

Alabama Step Up

State program

Learn more

at AHFA

Best for

Down payment assistance

Low mortgage insurance

What you need to know

Step Up helps eligible low- to moderate-income home buyers purchase a new or existing home with a 30-year, fixed-rate conventional or FHA mortgage and 3% down payment assistance. Your income must be under $97,300, regardless of household size or where in Alabama you buy the home. Features include 3%

 

Alabama Mortgage Credit Certificates

State program

Learn more

at AHFA

Best for

Tax credits

What you need to know

Mortgage Credit Certificates (MCCs), dollar-for-dollar federal income tax credits of 20% to 50% of their mortgage interest, up to $2,000, are for first-time home buyers with conventional, FHA, VA or USDA fixed-rate mortgages. The credit can be used as long as you keep the original first mortgage.

 

» MORE: Find the best mortgage lenders for first-time home buyers

Your next step

If one of these state programs seems right for you, get started by reaching out to a participating lender. They can answer questions, identify target areas, calculate the assistance you can get and help you apply. After that, it’s time to get ready for your homebuying education course, a Step Up requirement, before the mortgage closes.

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