Alabama FHA Loan Requirements 2026
This guide covers 2026 FHA loan limits for every Alabama county, credit score and down payment requirements, mortgage insurance premiums, and how FHA compares to conventional financing in Alabama.
FHA Loan Limits by Alabama 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 | 1-Unit FHA Limit | Notes |
|---|---|---|
| Jefferson (Birmingham) | $541,287 | National floor |
| Mobile (Mobile) | $541,287 | National floor |
| Madison (Huntsville) | $541,287 | National floor |
| Baldwin (Gulf Shores / Daphne) | $541,287 | National floor |
| Shelby (Birmingham suburbs) | $541,287 | National floor |
| Montgomery (Montgomery) | $541,287 | National floor |
| Tuscaloosa (Tuscaloosa) | $541,287 | National floor |
| Lee (Auburn / Opelika) | $541,287 | National floor |
| All other counties | $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.
Alabama FHA Loan Requirements Overview
| Requirement | Standard FHA | Notes |
|---|---|---|
| Credit score | 580 (3.5% down); 500–579 (10% down) | Most Alabama lenders require 620+; AHFA programs require 640 |
| Down payment | 3.5% | Can combine with AHFA First Step or Step Up assistance |
| DTI ratio | Up to 57% with strong factors | 43% preferred |
| Primary residence | Required | Owner-occupied only |
| Property condition | Must meet FHA Minimum Property Standards | Older Alabama housing stock: check roof, heating system, foundation |
FHA Mortgage Insurance Premiums (MIP)
| MIP Type | Rate | On a $300,000 Loan |
|---|---|---|
| Upfront MIP (UFMIP) | 1.75% of loan amount | $5,250 (typically financed) |
| Annual MIP (monthly) | 0.55%/yr (30-yr, LTV 95%+) | ~$138/mo |
MIP cancellation: FHA MIP is permanent on loans originated after June 3, 2013, with less than 10% down payment. For Alabama buyers who put down 10% or more, MIP cancels after 11 years.
FHA vs. Conventional in Alabama
| Factor | FHA | Conventional |
|---|---|---|
| Min credit score | 580 | 620 |
| Down payment | 3.5% | 3–20% |
| Mortgage insurance | MIP (permanent with <10% down) | PMI (cancels at 80% LTV) |
| Max loan limit (statewide) | $541,287 | Conforming limit applies ($832,750) |
| AHFA pairing | Yes — First Step or Step Up covers down payment + costs | Yes — via HFA Advantage conventional financing |
AHFA First Step + FHA Combination
FHA is one of the eligible first mortgage types for AHFA’s First Step and Step Up programs. Pairing FHA with First Step lets an Alabama buyer put little to nothing down: the 3.5% FHA minimum down payment can be covered by the repayable second mortgage from First Step, with any remainder available for closing costs. This combination requires a minimum 640 credit score under AHFA’s program rules, even though standalone FHA financing allows scores as low as 580.
Here’s how it works on a $300,000 purchase:
| Item | Amount |
|---|---|
| Purchase price | $300,000 |
| FHA down payment (3.5%) | $10,500 |
| First Step assistance (4% of sales price, capped at $10,000) | $10,000 |
| Net down payment from buyer | $500 |
Unlike Missouri’s forgivable MHDC assistance, AHFA’s First Step and Step Up funds are structured as a 10-year repayable second mortgage — the buyer makes payments on both the first and second mortgage. Confirm current terms and monthly payment impact with an AHFA-participating lender at ahfa.com.
