Purchasing a home in the Heart of Dixie is the dream of many Alabama residents. The state offers funding for first-time homebuyers in the form of low-interest loans, and some individual counties offer grants. The Department of Housing and Urban Development funds the largest homebuyer-assistance programs in the state. HUD and housing agencies statewide defines a first-time buyer as someone who has not owned a home in the last three years.
Alabama Housing Finance Authority's Step Up Program
Alabama's housing authority administers a state bond program known as Step Up. It targets low- to moderate-income homebuyers who have sufficient credit and income to qualify for a first mortgage, but lack the funds for a down payment.
The AHFA finances a second mortgage for 10 years, which you use in conjunction with a 30-year fixed-rate Federal Housing Administration or conventional mortgage. You may use the program to purchase a detached house, a townhome, condominium or manufactured home. You need a 620 credit score or higher to qualify, and your total monthly expenses, including the new housing payment, may not exceed 45 percent of your gross income. You can earn up to $97,300 per year. You may receive up to $7,500 or 3 percent of the purchase price for a down payment and must pay any difference in down payment requirement out of pocket.
Grant Money for Mobile County Buyers
Local governments in Alabama also offer grants and down payment loans to homebuyers within city or county limits. Check with your local housing authority to find about these first-time buyer programs, as funding and availability varies by location and time of year.
For example, Mobile County offers grants between $1,000 and $10,000 to low-income families. Grant money may be used to purchase a manufactured home, detached house, town home, condo or 1- to 4-unit residence in specific neighborhoods within the county. At the time of publication, this included Bayou la Batre, Chickasaw, Citronelle and unincorporated areas of Mobile. Income limits are based on household size. For example, a 4-person family could earn between $26,951 and $43,100, at the time of publication.
Birmingham Rent-to-Own Program
The Housing Authority of the Birmingham District offers funding to first-time homebuyers through the Lease-Purchase Homeownership Program. Eligible low- to moderate-income participants must agree to rent a HABD-owned home for three years and obtain a traditional mortgage to purchase the home by the end of the tenancy period. Participants must earn at least $15,000, but no more than 80 percent of the Birmingham median income. Buyers are required to pay $500 toward the purchase of the home.
Tips for Homebuyers Seeking Assistance
No grant program provides 100 percent of a home's purchase price, according to HUD. Housing authorities need you to obtain a mortgage and provide at least a minimal amount of your own funds toward the down payment or closing costs of your new home. This ensures that you hold a financial stake in the property and reduces the lender's and the housing authority's risk.
Grant and down-payment assistance programs also require you to complete a homebuyer education course from an approved organization. Homebuyer education helps you understand the mortgage qualifying process, homebuyer costs and homeowner expenses, so you are financially prepared to purchase and own a home.
- Alabama Housing Finance Authority: What is Step Up?
- Alabama Housing Finance Authority: Step Up Procedural Manual
- Mobile County: Grants Deptartment -- Residency & Income Requirements
- Mobile County: Down Payment Assistance (DPA)
- HUD: Resources for Individuals
- Housing Authority of the Birmingham District: Homeownership Oppoiesrtunit
- BirminghamAL.gov: City of Birmingham Consolidated Plan 2010-2015