5 First-Time Home Buyer Grants In Alabama 2023

First-time home buyer grants in Alabama assist residents in making their dreams of homeownership a reality. Assistance varies by program and includes low-interest loans, down payment grants, and tax credits.

While first-time home buyer grants in Alabama are intended to make homeownership more accessible, they typically have strict eligibility requirements.


What are First-Time Home Buyer Grants?

First-time home buyer programs are intended to assist people who have never owned a home before. These programs, like first-time home buyer grants, are typically funded by federal, state, or local governments.

They are available in the form of down payment assistance, forgivable mortgages, closing costs, or tax credits.

What is a Step-Up Loan?

STEP-UP LOAN is a type of home loan with varying equated monthly installments (EMIs) spread over the loan’s tenure, i.e., the EMI is lower in the early years but increases over time.

One of the primary benefits of a step-up loan over a traditional home loan is that it increases the individual’s loan eligibility. In most cases, step-up loans are only available to salaried individuals and professionals.

In other words, businesspeople cannot benefit from this type of loan. This is because lenders generally believe that salaries tend to rise year after year.

This is not always the case with businesses, which may be doing well at one point in time but are widely perceived to be volatile in nature. Individual circumstances will determine whether step-up loans or traditional home loans are preferable.

There are numerous products available to meet the various needs of individuals. However, the truth about a step-up is that it increases the borrower’s net cash outflow. As a result, the borrower faces a high risk of not being able to meet future payments due to cash flow considerations.

Benefits you get as a first-time home buyer in Alabama

Eligible homebuyers (first-time or repeat buyers) can get a 30-year conventional (HFA Advantage), FHA, or VA loan at a competitive rate, as well as down payment assistance, through the program.

How Alabama First-Time Homebuyer Programs Work

The steps to apply for any of Alabama’s first-time homebuyer programs depend on the program and type of assistance.

  • Review income and credit requirements: To ensure your eligibility, familiarize yourself with the program’s income and credit requirements.
  • Find a lender: AHFA does not make direct loans to borrowers. If you want to apply for one of their programs, you’ll work with a participating lender who will guide you through the application process.
  • Apply to local programs: The application process for community or local programs differs. If you are only looking for down payment assistance, you will work with the organization directly. If you want to combine the aid with a loan, you must apply through one of the program’s participating lenders.
  • Attend a homeownership education course: You must attend a program-approved homebuyer education course to be eligible for a down payment or closing cost assistance.
  • Be aware of program guidelines: Some programs have requirements after you close on the house. For example, if you apply for the FTHB Down Payment Assistance program, you must live in the house for five years to receive full loan forgiveness.

The Credit Score is Needed to buy a House in Alabama

To qualify for a standard mortgage in Alabama, you must have a credit score of 620. If your credit score is lower than this, mortgage options for people with credit scores as low as 500 are available.


10 Ways to Rapidly Catch Up on Your Retirement Savings in Your 40s

30 Simple Ways to Save Money Fast on a Low Income

5 Best Investment Portfolio Management Software for Individuals

List of 5 First-Time Home Buyer Grants and Programs in Alabama

Below we have listed 5 first-time home buyer grants in Alabama:

  • Step Up

The Step-Up program is open to homebuyers who earn less than the program income limit and meet creditworthiness requirements. The program provides a competitive 30-year fixed interest rate as well as the option of down payment assistance.

  • Affordable Income Subsidy Grant

Along with the current Step Up down payment assistance, the HFA Advantage product offers qualified borrowers a grant to assist with closing costs. The qualifying income of the borrower(s) cannot be more than 80% of the Area Median Income (AMI) for the property’s location.

  • Mortgage Credit Certificates

A Mortgage Credit Certificate (MCC) reduces the amount of federal income tax that homebuyers must pay, which frees up income for mortgage qualification. Borrowers can claim a tax credit of up to 50% of their mortgage interest paid per year, up to a maximum of $2,000 per year.

It is a one-for-one reduction in the borrower’s federal tax liability. To receive immediate savings from the MCC, the borrower must file a revised W-4 withholding form with their employer, which should result in a lower yearly tax contribution and an increase in take-home pay. Borrowers can also choose to realize the savings once a year by filing a federal income tax return.

  • Montgomery homeownership program: 

The Montgomery Housing Authority has a Homeownership Program that assists participants in the housing choice voucher program in purchasing homes and provides mortgage assistance to first-time homebuyers.

  • Huntsville homeownership and down payment assistance programs

The City of Huntsville’s Community Development Department provides a couple of homeownership programs to first-time homebuyers who meet certain income requirements.

Those who qualify for its Single-Family HOME Ownership program can purchase new homes in the Terry Heights and Edmonton Heights neighborhoods. The Down Payment Assistance program helps with down payments and closing costs up to $7,500.


What is the Alabama Step Up program?

Step Up is a homeownership program specifically designed for moderate-income home buyers who can afford a mortgage but require assistance with the down payment.

A 10-year second mortgage secures the down payment funds, which are combined with a 30-year fixed-rate first mortgage.

Does the government help first-time buyers?

The FHA loan program is managed by the Federal Housing Administration (FHA). If you are a first-time buyer, this may be a good mortgage option because the requirements are not as stringent as for other loans. The down payment and closing costs are both minimal.

How old do you have to be to get a mortgage in Alabama?

According to US Legal, it varies by state law, but it is 18 in most states. According to the Law Library, the exceptions are Alabama and Nebraska, where it is 19, and Colorado and Mississippi, where it is 21.

What do I need for a NILS loan?

You must have a health care card/pension card or earn less than $45,000 per year to be eligible for NILS (after tax), have lived in your current location for more than three months demonstrate your ability to repay the loan within the time frame specified.

What is a balloon payment?

A balloon payment is a one-time payment of the principal balance made at the end of a loan term. A balloon payment is an inflated one-time amount owed, usually after interest-only payments have been made over the life of the loan, rather than paying down the principal over the course of the loan.


If you’re ready to start your home-buying journey, an Alabama Housing Finance Authority-approved mortgage lender can be a good place to start. Keep in mind that, while AHFA does not directly offer mortgages, it does collaborate with over 50 lending institutions throughout the state.

It’s a good idea to shop around and compare loan offers from different lenders to find the best deal for your situation. Hope this article on the first-time home buyer grants in Alabama. Share your view with us in the comment section below.

You can learn more from the video below:


About Author

Precious Ejimofor
My name is Precious Ejiofor, I am a professional self motivated, dependable writer and editor, with over 4 year of experience in writing for variety of business and platforms. I am able and capable to write on any kind of topic.
Specifically, I focus on producing persuasive and compelling contents that is thoughtful, prominent, and engaging.

Get Latest Market Updates!

Enter your name & email to get started!

We don’t spam! Read our privacy policy for more info.

Sharing is caring...

Leave a Comment