Down Payment Assistance Programs for First-Time Homebuyers in Alabama

Alabama, referred to as the “Heart of Dixie,” is a state with a rich history. It hosts a variety of attractions from the stunning Gulf Coast beaches to the vibrant cities of Birmingham and Huntsville. Tourists can visit the Civil Rights Trail, which highlights the state’s key role in the civil rights movement, or enjoy outdoor activities in the breathtaking parks and forests.

The state is also known for its Southern hospitality and delicious food making it a dream destination for tourists.

The one sector that is facing considerable challenges is Alabama’s housing sector. The average price of homes in the state is $231,948 and the high mortgage rates are around 6.9%, making it difficult for individuals to buy a house. Many first-time buyers struggle to save money for down payments, especially as inflation affects overall living costs.

Are you facing problems in purchasing a property in Alabama? Don’t give up on your dreams of becoming a homeowner as we will look at some down payment assistance programs. These initiatives provide competitive fixed-rate mortgage loans which help individuals realize their dream of becoming a homeowner.

Looking for Assistance in a Specific Part of Alabama?

Are you looking for down payment assistance programs available for first-time homebuyers in Alabama? Well, you are at the right place as we will be looking at certain initiatives which support would-be homeowners who need support and guidance with their closing costs.

Down Payment Assistance in Alabama

Did you know that the average down payment for a home purchase is around 10-20% of the home’s value in Alabama? Prospective homebuyers in the state are facing difficulties in saving enough for a down payment with 47% putting down less than 20% on their home.

That’s why the Alabama Housing Finance Authority is providing an assistance program to eligible homebuyers and make their homeownership dreams come true. These initiatives help individuals and families overcome one of the biggest hurdles in buying a home: the down payment.

They are beneficial for first-time buyers, low-to-moderate-income households, and individuals with limited savings. They reduce the upfront cost of purchasing a home which contributes to greater homeownership, economic stability, and community development.

Alabama Housing Finance Authority Step-Up Program

The Alabama Housing Finance Authority Step Up Program provides assistance to moderate-income homebuyers in Alabama who require help with down payments while still being able to afford a mortgage.

Fundamentals

• Assistance Type: 10-year second mortgage
• Sponsor: Alabama Housing Finance Authority (AHFA)
• Assistance Amount: $10,000 (at maximum)

Eligibility Requirements

• The household income of the individual should not be higher than $159,200 irrespective of household size or location.
• The individual seeking down payment assistance should have a credit score of 640 or higher (or 680 or higher if their income is higher than 80% of the area median income).
• The debt-to-income ratio showed to be 45% or lower.
• The participants are required to complete a homeownership education course.
• The property being purchased must be located in Alabama

City of Huntsville Down Payment Assistance

The City of Huntsville Down Payment Assistance Program (DAP) provides help to first-time homebuyers who are getting overwhelmed by overcoming the financial barriers associated with purchasing a house.

Fundamentals

• Assistance Type: Zero-interest second mortgage (forgiven after five years into residency)
• Sponsor: City of Huntsville’s Community Development Department with the Family Services Center and various authorized lenders
• Assistance Amount: $7,500 for existing homes/$10,000 for new construction

Eligibility Requirements

• The applicant must be a first-time homebuyer
• The purchased/constructed house should be within the limits of Huntsville, Alabama.
• The applicant should meet income thresholds based on household size
• The applicant should meet the credit requirements set by the lender
• The applicant has to participate in a homebuyer education course
• The applicant should be committed to having a primary residence in the property for at least five years

Mobile County Down Payment Assistance Program

The Mobile County Down Payment Assistance Program provides financial aid to first-time homebuyers to make homeownership more accessible for low-income households in the area in the form of a grant.

It is to be noted that the financial assistance does not entertain coverage requests for purchasing mobile homes, condominiums, townhouses, and duplex or multiplex units.

Fundamentals

• Assistance Type: Grants
• Sponsor: U.S. Department of Housing and Urban Development
• Assistance Amount: $25,000 (at maximum)

Eligibility Requirements

• The applicant should be a first-time homebuyer (unless they partake in the New Construction of Affordable Homes Program)
• The applicant’s annual household income projections should not be higher than 80% of the current median family income for Mobile County residents.
• The purchased property should serve as the primary residence for at least five years.
• The property should be located in Mount Vernon Satsuma, Bayou la Batre, Citronelle, Chickasaw, Creole, Prichard, Saraland, Semmes, or in unincorporated areas of Mobile County.

Decatur Home Ownership Made Easier Program

The Decatur H.O.M.E. (Decatur Home Ownership Made Easier) initiative provides financial assistance to low-income individuals with an aim to promote sustainable homeownership and improve the quality of life of their residents.

• Assistance Type: Grants
• Sponsor: City of Decatur
• Assistance Amount: 50% to full coverage of minimum down payment costs

Eligibility Requirements

• The applicant should qualify as a low-income individual.
• The applicant must not be a homeowner in the last three years.
• The applicant should have pre-approval for a mortgage loan.
• The individual must be a first-time applicant for the Decatur H.O.M.E. program.
• The applicant is required to complete a housing counseling course

Alabama Down Payment Assistance Program FAQs

What are the benefits of down payment assistance for citizens of Alabama?

There are several benefits of down payment assistance programs. These initiatives reduce the upfront cash needed to buy a home and offer more favorable loan terms which could qualify individuals for a larger mortgage.

What types of down payment assistance are available in Alabama?

Alabama offers several types of down payment assistance which include deferred second mortgages, forgivable second mortgages, forgivable grants, and mortgage credit certificates to help lower the cost associated with homeownership.

Is it mandatory for would-be homeowners in Alabama to complete a homeownership education course?

Yes, applicants applying for certain financial assistance programs such as the AHFA Step Up program and Decatur HOME initiative are required to complete a homeownership education course.

Do applicants have to be residents of the house purchased through financial assistance programs in Alabama?

Certain financial assistance programs have made it mandatory for individuals to be primary residents of the house for up to five years after getting the grants.

Disclaimer: This article is for informational purposes only and should not be considered as legal or financial advice. Please consult an attorney, mortgage lender, or CPA for guidance on your specific situation.