Alabama Mortgage Guide 2026
This Alabama mortgage guide covers everything you need to know about getting a mortgage in Alabama — FHA loan limits statewide, AHFA down payment assistance, property taxes, closing costs, and the 2026 Alabama housing market outlook.
Alabama Mortgage Guide: Loan Limits by County (2026)
Every one of Alabama’s 67 counties carries the same 2026 FHA limit — the national floor of $541,287 for a single-family home. Alabama has no high-cost counties, so this figure applies whether you’re buying in the Birmingham metro, the Huntsville metro, or a rural county.
| County | Conforming Limit | FHA Limit | Notes |
|---|---|---|---|
| Jefferson (Birmingham) | $832,750 | $541,287 | National floor |
| Mobile (Mobile) | $832,750 | $541,287 | National floor |
| Madison (Huntsville) | $832,750 | $541,287 | National floor |
| Baldwin (Gulf Shores / Daphne) | $832,750 | $541,287 | National floor |
| Shelby (Birmingham suburbs) | $832,750 | $541,287 | National floor |
| Montgomery (Montgomery) | $832,750 | $541,287 | National floor |
| Tuscaloosa (Tuscaloosa) | $832,750 | $541,287 | National floor |
| Lee (Auburn / Opelika) | $832,750 | $541,287 | National floor |
| All other counties | $832,750 | $541,287 | National floor |
No Alabama county exceeds the FHA floor. Unlike many states with elevated limits in their largest metros, every Alabama county — including Jefferson and Madison — sits at the same $541,287 national floor for 2026. Confirm your county at HUD’s official lookup tool.
Loan Programs Available in Alabama
All major federal mortgage programs are available statewide in Alabama. Here’s how each compares for Alabama buyers:
| Program | Min Down Payment | Min Credit Score | Best For |
|---|---|---|---|
| FHA | 3.5% | 580 | First-time buyers, lower credit scores |
| VA | 0% | 580–620 | Veterans, active duty, surviving spouses |
| USDA | 0% | 640 | Rural Alabama buyers meeting income limits |
| Conventional | 3–20% | 620 | Strong credit, wants PMI cancellation |
| AHFA First Step | 0% effective | 640 | First-time or repeat buyers using bond-funded below-market rate + repayable second mortgage |
| AHFA Step Up | 0% effective | 640 | Buyers above First Step’s income limits who still need down payment help |
AHFA Down Payment Assistance Programs
The Alabama Housing Finance Authority (AHFA) offers two main down payment and closing cost assistance programs that pair with a first mortgage. Unlike some states’ HFA programs, both AHFA programs use the same repayable-second-mortgage structure — the difference is who qualifies and the interest rate on the first mortgage.
| Program | Assistance | Who Qualifies |
|---|---|---|
| First Step | Up to $10,000 or 4% of sales price, whichever is less, as a repayable second mortgage | First-time or repeat buyers within bond-program income and sales price limits; below-market first-mortgage rate |
| Step Up | Up to $10,000 or 4% of sales price, whichever is less, as a repayable second mortgage | First-time or repeat buyers with income up to $172,800; market-rate first mortgage, no sales price cap |
AHFA’s down payment assistance is a repayable second mortgage, not a grant. Both programs use a 10-year second mortgage alongside the 30-year fixed first mortgage. An additional Affordable Income Subsidy Grant — a non-repayable 0.5% or 1% of loan amount, depending on income — can stack on top to help with closing costs. Confirm current terms at ahfa.com.
Alabama Property Taxes
Alabama property taxes are assessed and collected at the county level, and rates vary depending on local school district and municipal levies. Alabama’s statewide average effective property tax rate is around 0.34% — among the lowest in the nation — though individual counties range from roughly 0.30% to 0.60%.
| Home Value | Est. Annual Tax (0.34%) | Monthly Escrow |
|---|---|---|
| $200,000 | $680 | $57 |
| $300,000 | $1,020 | $85 |
| $400,000 | $1,360 | $113 |
Rates vary meaningfully by county. Jefferson County runs higher (around 0.59%), while Baldwin County runs lower (around 0.30%). Madison County (Huntsville) sits close to the statewide average (around 0.40%). Alabama also offers a General Homestead exemption of up to $4,000 in assessed value for primary residences. Confirm the exact rate and any exemptions for your address with the Alabama Department of Revenue.
Closing Costs in Alabama
Alabama closing costs include the state’s deed transfer tax and mortgage tax, both charged at recording. Buyers typically pay 2–5% of the purchase price in total closing costs, with the largest buyer-side line items being loan origination, title insurance, and the mortgage tax itself.
| Fee | Typical Amount | On a $300,000 Purchase |
|---|---|---|
| Loan origination fee | 0.5–1% of loan amount | $1,500–$3,000 |
| Mortgage tax | 0.15% of loan amount | ~$450 |
| Deed transfer tax | 0.10% of purchase price | $300 |
| Lender’s title insurance | ~0.5–1% of loan amount | $1,500–$3,000 |
| Total estimated buyer costs | 2–5% of purchase price | $6,000–$15,000 |
Alabama charges both a deed transfer tax and a mortgage tax. The deed transfer tax runs $0.50 per $500 of purchase price (0.10%), and the mortgage tax runs $0.15 per $100 of the loan amount (0.15%). Buyers customarily pay to record the deed and mortgage, though this can be negotiated as part of the purchase agreement.
Alabama Housing Market Overview (2026)
Alabama’s housing market is anchored by its two largest metros — Birmingham and Huntsville — along with the growing Gulf Coast market in Baldwin County and a strong secondary market in Mobile. Alabama home values remain well below the national median, making it one of the more affordable states in the country.
| Area | Market Notes |
|---|---|
| Birmingham | Median home price around $191,000; roughly flat year-over-year; most affordable major metro in the state |
| Huntsville | Median home price around $350,000; up roughly 3.5% year-over-year, driven by aerospace, defense, and tech job growth |
| Mobile | Median sale price around $216,500; up roughly 14% year-over-year |
| Baldwin County (Gulf Coast) | Countywide median around $383,000–$406,000; resort areas (Gulf Shores/Orange Beach) softening, while Eastern Shore family markets (Daphne, Spanish Fort, Fairhope) stay flat to modestly up |
