Ready to Buy?
Do you dream of owning a home? Think you cannot afford it?
Since 1980, AHFA's versatile programs have helped more than 75,000 families purchase a home. Our homebuying programs make homeownership more affordable for Alabamians.
Step Up Program
Step Up is a homeownership program designed specifically for moderate-income home buyers who can afford a mortgage but need help with the down payment.
It offers a competitive 30-year fixed interest rate and down payment assistance. Participants who earn less than $130,600 are eligible for the program, which can provide up to $10,000 or 4% of the sales price (whichever is less) in down payment/closing cost assistance.
The down payment funds are secured by a 10-year second mortgage and are combined with a 30-year, fixed-rate first mortgage.
Affordable Income Subsidy Grant
AHFA and Freddie Mac have teamed up to offer the Freddie Mac Home Possible Advantage conventional loan product to borrowers in Alabama.
In addition to the down payment assistance currently offered through Step Up, the Home Possible Advantage product provides eligible borrowers a grant to help with closing costs. Borrowers with qualifying income at or below 50% of the Area Median Income (AMI) limits (as published by Freddie Mac) are eligible for an Affordable Income Subsidy (AIS) grant in the amount of $2,500. Borrowers with qualifying income between 50.01% - 80% of AMI limits are eligible for a grant of $1,500.
Income limits for these grants are determined by the county location of the home: Freddie Mac Home Possible Eligibility Map
Mortgage Credit Certificates
A Mortgage Credit Certificate (MCC) is a dollar-for-dollar tax credit that increases available income to qualify for a mortgage and reduces the amount of federal income tax homebuyers must pay. Borrowers can claim a tax credit of up to 50 percent of the mortgage interest paid per year, capped at $2,000 annually.
Homebuyers can choose to receive immediate savings, which will increase their monthly take home pay, or choose to receive the credit once a year when filing federal income tax returns.
To qualify, borrowers must be a first-time homebuyer or have not owned a home in the last three years or purchase a home in a “target” area exempt from the first-time homebuyer rule (contact a lender for more information). Homebuyers must also meet federally established income and sales price limits.
An MCC can be combined with the Step Up program to give homebuyers even greater purchasing power.
Want to Find Out More?
To find out if you are eligible for these homebuying programs, visit https://www.ahfa.com/homebuyers/am-i-eligible.
We work with a select network of lenders across Alabama who will help you learn more about our programs. They'll also walk you through every step of the home buying loan qualification process. To find a list of our participating lenders and assistance on finding a lender in your area, visit https://www.ahfa.com/homebuyers/how-do-i-apply.
Need to do Homework?
Not Quite Ready Yet?
If you are not ready to buy right now, there are things you can do to find out if homeownership is right for you and start on the journey to buying a home. Check out the Investing in You: Investing In a Home video detailing the benefits of investing in homeownership. If you decide to move forward, start with the 3 steps below.
Money Management/Savings
Managing money doesn’t have to be a painful task. By following the three simple steps below, you can eliminate the notion that building a savings account means living by a rigid set of financial rules.
- Set priorities
- Establish a workable budget
- Commit to follow the budget you’ve developed
Setting a budget and sticking to it will allow you to control your finances instead of letting your finances control you. A budget helps you prepare for large purchases and helps you identify items that are costing too much. It’s an important part of preparing to buy a home. In addition, since you have established a savings plan as part of your monthly budget, it becomes a habit to save for the future.
A budget can help you save for upfront costs, closing costs, and any emergency costs that may come up, without sacrificing your ability to pay your bills. Be sure to also save enough to cover expenses that face a new homeowner like moving, hooking up utilities, yard tools, maintenance supplies, furniture, etc.
Calculators
Consumer Credit
An important part of preparing for your first home purchase is learning how to manage credit wisely. Credit allows you to buy goods and services or obtain money based on the promise to repay. When purchasing a home, you will apply for a mortgage loan. This will probably be the largest single purchase you will ever make. Obtaining mortgage financing is a complex process and generally takes more time than other types of credit applications.
Your lender will require you to have enough income to make monthly mortgage payments without neglecting other financial obligations. This is called qualifying for a mortgage loan. Through the qualification process, you will undergo a thorough credit review. Establishing a good credit record early is important for this reason.
You are entitled to a free credit report every 12 months from each of the three major consumer reporting companies (Equifax, Experian and TransUnion). You can request a copy from AnnualCreditReport.com. If you find an error on your credit report, you can dispute the information with the credit reporting agency.
Keep in mind that even if you’re unable to qualify right now due to credit issues, you can always work on improving your credit and buying a home in the future.
For more information, visit the Consumer Financial Protection Bureau’s website.
Qualifying for a Mortgage
The mortgage amount you qualify for depends upon your income, monthly debts, and the cost of the home you want to buy. Two basic loan types are available:
- Government Mortgages: generally offered to everyone
- Conventional Mortgages: generally offered to everyone
If you are not sure how much you can afford to pay for a home, your lender can help you develop an estimate by assessing your financial picture. Based on this preliminary analysis, they will tell you the amount for which you would qualify (prequalification).
Once you find the home you want to purchase, your lender will verify that the information you provided and received during your prequalification is accurate during the application process. Your lender will also be able to guide you through different loan programs and help you select the loan that best suits your needs.
Prequalification is a necessity in a competitive market to show sellers your offer is reliable.
To find a list of AHFA-participating lenders who can assist you with learning about AHFA programs and getting prequalified, visit https://www.ahfa.com/homebuyers/how-do-i-apply.
HUD-Approved Housing Counseling Agencies
We recommend contacting a HUD-approved housing counseling agency that can provide advice on buying a home, renting, defaults, foreclosures, and credit issues. Click Housing Counseling Services to find a list of agencies.