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First Time Home Buyer in AlabamaIf you are looking to buy your 1st home, you've come to
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Today’s Rates for First Time Homebuyers in Alabama

Monday, July 22, 2024

Mortgage rates are at 3.00% for the 30 year fixed loan program and at 2.56% for the 15 year fixed. As for variable rates, the 5/1 ARM rate currently stands at 4.56%. Check out FHA and VA rates as well if you are doing low or no down payments.

Alabama First Time Home Buyer Checklist

  1. Find out what loan types and programs are available. Depending on your background and area, you may be elgible for no down payment loans through VA or USDA. 
  2. Check your credit score. Don’t put this off! You're most likely to qualify with credit above 600, but some lenders accept scores in the high 500s. If your credit is poor, take the time to repair it before you try to take out a loan. You can find many sites on the internet for free, but you can also request a report from one or more of the three major credit bureaus.
  3. Compare mortgage rates in your area. Contact a few lenders in your area of Alabama and ask for a mortgage rate quote. Compare their responses and pick a lender who not only provides the best offer, but has quality customer service and is in good standing with the Better Business Bureau.
  4. Get pre-approved for a mortgage. Once you’ve chosen a lender, provide proof of income with pay stubs and your W-2s or other tax returns. 
  5. Assess your budget. Your lender may pre-approve you for a loan amount that is larger than you had anticipated, but do not base affordability on that loan amount. Remember nothing is set in stone with a pre-approval, and also that only you can truly know what you can afford to pay monthly. 
  6. Get home shopping. In the meantime, do not make any large purchases, take out any new loans, or anything else that drastically skews your financial standing. Once you're ready to apply for the loan and even after you've applied, lenders may check your information again and deny you the loan. 

Low Down Payment Loans Through FHA

If you’re a first time home buyer without a large down payment, an Alabama FHA loan may be your best best. FHA loans are backed by the Federal Housing Administration and are designed to help home buyers with limited resources receive funding.

  • Down payment: 3.5%
  • Minimum acceptable credit score: 580 (varies)
  • Mortgage insurance: Upfront (1.75% loan amount) and monthly
  • Property guidelines apply and are verified via home inspection

You can find additional information about FHA loans on the Alabama page of the FHA website.

No Down Payment Loans Through USDA

The United States Department of Agriculture insures Rural Development loans for nothing down to Alabama home buyers looking to live in USDA eligible areas. You can find out if your area is eligible by searching the USDA's website. Note that more populous areas such as Birmingham, Montgomery, Huntsville, and Decatur are ineligible. 

  • Down payment: None required; financing up to 102% available depending on home appraisal
  • Minimum acceptable credit score: 620
  • Mortgage insurance: Upfront (2% loan amount) and monthly
  • Income maximums apply 

Alabama Grants and Assistance Programs

The Alabama Housing Finance Authority, or AHFA, offers grant, down payment help, and tax credit solutions to state residents who need home financing assistance.

One program is Step Up, and aids borrowers in securing down payment funds. When combined with other state programs described on the AHFA official site, the Step Up program allows borrowers to circumvent mortgage insurance. The Step Up program includes mortgage financing. 

Another option is the Mortgage Credit Certificate program, which lessens the taxes taken out of participants' paychecks, allowing for greater savings each month. The Mortgage Credit Certificate program does not include mortgage financing. 

These programs are still available in popular areas like Birmingham and Montgomery. Learn more about the Step Up and Mortgage Credit Certificate programs and your eligibility by visiting the official page

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