Alabama First Time Home Buyer – 2022 Loan Programs
Are you a first time home buyer looking to purchase a home in Alabama? On this page you can learn about the different types of mortgage programs that are available to first time home buyers. You may also view the different down payment assistance programs that are currently being offered in Alabama.
Alabama First Time Home Buyer Loans
Below are some mortgage programs that are available to first time home buyers.
Types of Mortgages:
- Conventional Loans – Conventional loans offer the best loan terms to borrowers with good or excellent credit, as well as those who can afford to place a larger down payment. If you are able to put 20% or more down, you will be able to avoid paying private mortgage insurance (PMI). However, conventional loans also offer low down payment options, such as programs that only require 3% down.
- FHA Loans – FHA loans are a good option for borrowers who may not be able to qualify for a conventional loan. The qualification requirements for FHA loans are much more lenient than conventional loans. This includes options for home buyers with credit scores as low as 500 (in order to qualify for a 3.5% down payment, you must have a credit score of at least 580).
- USDA Loans – USDA loans provide home buyers the opportunity to purchase a rural home without any down payment. These loans are intended for borrowers with low-to-moderate income. In addition to not requiring any money down, you can also finance the closing costs into the loan. This means you can essentially buy a home with no money out of pocket!
- VA Loans – Active duty military members and veterans can apply for a VA loan which allows you to buy your first home without any down payment. These loans are not available to the general public, but exclusively to military/veterans.
- Jumbo Loans – Any mortgage that does not meet the conforming loan limits is a jumbo loan. You can lookup the 2022 conforming loan limits for your county using this conforming loan limit lookup tool. If you want to buy a more expensive home, and have the income to qualify, jumbo lenders offer loan amounts up to $5,000,000.
- Non-Prime Loans – If you do not qualify for any of the above types of loans, you may consider a non-prime loan. These programs are helpful to people with a variety of credit issues (such as low credit scores, or a recent bankruptcy). Non-prime loans do not require any waiting periods after a bankruptcy, and most non-prime lenders allow credit scores as low as 500. Regardless of your situation, you should consider learning more about non-prime loans if you do not qualify for any of the other types of mortgages featured above.
These are some of the mortgage options that are available to first time home buyers.
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Upon receiving your request, we will match you with a mortgage lender that offers first time home buyer loans in Alabama. You will be provided with a free consultation, and the opportunity to get pre-approved for a mortgage.
Alabama Down Payment Assistance Programs
First time home buyers in Alabama may be eligible to receive down payment assistance. This includes programs offered throughout the entire state, as well as several locally offered programs. You can learn more about the statewide programs below.
AFHA Step Up Program
The Step Up program offered through the Alabama Finance Housing Authority allows those who make $97,300 or less an opportunity to receive down payment assistance. How this works is as long as you or those in your household (including your spouse) meet the income limits of $97,300, you may be eligible to receive a funds to put towards your down payment and closing costs. What makes this program unique is that it is also available to moderate income borrowers. A lot of down payment assistance programs are only available for low income borrowers.
How much can you expect to receive in assistance with this program? The minimum amount is $1,000, but you may be able to receive a grant of up to 3% of the the purchase price. The funds can be used towards your down payment and closing costs. In order to qualify, you must be a first time buyer, have a 620 credit score, and you must complete a homebuyer education course.
You can learn more about the Step Up program on the Alabama Housing Finance Authority website.
Alabama First Time Home Buyer Tax Credits
Another incentive available to first time home buyers is the Mortgage Credit Certificate (MCC). You can reduce your federal tax liabilities by claiming up to 50% of your mortgage interest (which is capped at $2,000). This is different from the standard mortgage interest tax deductions which you can also combine with this tax credit. This is an actual dollar for dollar reduction. So if you pay more than $4,000 annually in mortgage interest, you will be able to eliminate $2,000 of your taxes owed. This can save you a lot of money since after this deduction, you can then reduce your taxes even further with the standard interest rate deductions.
Are You Eligible for Down Payment Assistance?
A mortgage specialist can help you check your eligibility for down payment assistance. If you would like to receive some help checking what down payment assistance programs you may be eligible for, fill out this form. We will match you with a mortgage lender that can help you see if you qualify for any down payment assistance.
First Time Home Buyer Questions
Below are some of the most frequently asked questions about first time home buyer loans:
How much do I need for a down payment?
The minimum down payment requirement will depend on the type of mortgage program. USDA and VA loans do not require any down payment. FHA loans only require a 3.5% down payment (and allow down payment assistance to be used). Conventional loans typically require either 3% or 5% down. The minimum down payment for a non-prime loan is usually at least 10% (or higher).
What is the maximum loan amount that I can qualify for?
The amount that you will be allowed to borrow will depend mostly on your income, as well as the particular type of loan you are interested in. There are maximum loan limits for each type of mortgage program which are set at the county level. Conforming loan limits are the maximum loan amounts allowed for conventional mortgages. FHA loans have their own loan limits. This is not necessarily how much you can borrow though, but the maximum amount allowed in your location. The amount that you can personal qualify for will be based upon your income, and how much debt you have. For most loans, your monthly mortgage payment, along with your monthly debts may not exceed 43% of your income.
Can I buy a home without a real estate agent?
It depends on your state and the type of loan program. For some states, you must use an agent. In other states, you are not required to use a real estate agent for many loan program, such as conventional mortgages. However, some loan types require that you use a real estate agent regardless of your location, such as USDA loans.
Are there mortgage loan options for borrowers with bad credit?
Yes, both FHA loans and non-prime loans are available to borrowers with lower credit score, and other credit challenges. The minimum credit score required for an FHA loan is 500. For non-prime loans, there are lenders that allow a borrower to have a credit score even below 500. Non-prime loans also do not have any waiting periods after a bankruptcy.
Can I buy a home if I owe tax debt?
For government-backed loans, such as FHA, VA, and USDA loans, you can buy a home with tax debt as long as you have made a payment plan with the IRS, and are not behind on the payments. Any federal debt must be in good standing in order to get a government-based mortgage. If your tax debts have moved into the status of a tax lien, this will prevent you from getting a home loan until it is resolved.
Can I buy a home if I have student loans?
As long as you are not delinquent on the student loan payments, and the monthly payments do not cause excessive debt-to-income ratios, you can still get a mortgage.
Can I buy a home without my spouse?
A common question is if you can buy a house without your wife or husband. The short answer is yes. There are numerous reasons someone may want to exclude their spouse from a mortgage application, such as lower credit, lack of job history or income, or one spouse having excessive debt that could prevent an approval. You may be able to qualify and get a home loan without your spouse.
How do I find out if I qualify for a mortgage?
A loan representative can help you determine what mortgage programs you may qualify for, and also check your eligibility for down payment assistance. If you would like to receive a free consultation, we can help match you with a mortgage lender that offers first time home buyer loans in Alabama.