Alabama First-Time Home Buyer Guide 2026
This guide for Alabama first-time home buyers covers AHFA’s First Step and Step Up down payment assistance programs, income and purchase price limits, eligibility requirements, and step-by-step guidance for first-time buyers in Alabama.
First Step Assistance Program
First Step is AHFA’s primary down payment assistance program, funded through tax-exempt mortgage revenue bonds. It provides up to $10,000 or 4% of the sales price, whichever is less, as a repayable second mortgage for down payment and closing costs, paired with an FHA, VA, USDA, or Freddie Mac HFA Advantage conventional first mortgage at a below-market rate.
| Feature | Detail |
|---|---|
| Assistance amount | Up to $10,000 or 4% of the sales price, whichever is less, as a repayable second mortgage |
| Repayment | 10-year second mortgage term, alongside the 30-year fixed first mortgage |
| Eligible first mortgage | FHA, VA, USDA, or Freddie Mac HFA Advantage conventional loan at a below-market bond rate |
| Min credit score | 640 |
| Max debt-to-income | 45% |
| First-time or repeat buyer? | Both eligible — First Step is not restricted to first-time buyers |
| Purchase price / income limits | Set by AHFA and vary by area — see Income and Purchase Price Limits below |
Step Up Assistance Program
Step Up is AHFA’s market-rate down payment assistance program for buyers whose income exceeds First Step’s bond-program limits. It uses the same repayable second-mortgage structure as First Step, but the first mortgage is priced at market rates rather than a bond-subsidized rate, and there is no statewide purchase price cap.
| Feature | Detail |
|---|---|
| Assistance amount | Up to $10,000 or 4% of the sales price, whichever is less, as a repayable second mortgage |
| Repayment | 10-year second mortgage term, alongside the 30-year fixed first mortgage |
| Eligible first mortgage | HFA Advantage conventional, FHA, VA, or USDA loan at market rate |
| Min credit score | 640 |
| Max debt-to-income | 45% |
| Income limit | $172,800 or less, statewide flat limit — no variation by household size or metro area |
| Purchase price limit | None stated |
An Affordable Income Subsidy Grant can stack on top of either program. Eligible lower-income borrowers may qualify for a non-repayable grant of 0.5% or 1% of the loan amount to help with closing costs, in addition to First Step or Step Up assistance. Confirm current terms at ahfa.com.
Income and Purchase Price Limits
AHFA’s First Step limits vary by metro area and by “target” vs. “non-target” designation within each area; Step Up uses a single statewide income limit with no purchase price cap. Figures below are effective June 24, 2026.
| Area | First Step Income Limit (1-2 person) | First Step Income Limit (3+ person) | Max Sales Price |
|---|---|---|---|
| Birmingham-Hoover (Jefferson, Shelby, Bibb, Blount, St. Clair) — Target | $124,920 | $145,740 | $692,211 |
| Birmingham-Hoover — Non-Target | $104,100 | $119,715 | $566,355 |
| Huntsville MSA (Madison, Limestone) — Target | $138,120 | $161,140 | $692,211 |
| Huntsville MSA — Non-Target | $115,100 | $132,365 | $566,355 |
| Auburn-Opelika (Lee) — Target | $130,680 | $152,460 | $692,211 |
| Auburn-Opelika — Non-Target | $108,900 | $125,235 | $566,355 |
“Target” vs. “non-target” is address-specific, not city-wide. Ask your AHFA-participating lender whether your specific address falls in a target or non-target area — this affects both your income limit and your maximum sales price. Step Up, by contrast, uses one flat statewide income limit of $172,800 with no sales price cap. Confirm current limits at ahfa.com.
Alabama Down Payment Assistance Eligibility Requirements
To qualify for First Step, Step Up, or AHFA’s other assistance programs, buyers generally must meet the following requirements:
- Credit score: Minimum 640 for both First Step and Step Up
- Owner-occupancy: Property must be owner-occupied and cannot be used for business, commercial, or rental purposes
- Income limits: Household income must be at or below AHFA’s published limit for the specific area and program
- Homebuyer education: Required for both First Step and Step Up
- Debt-to-income: Maximum 45%
- Participating lender: Must work with an AHFA-participating lender — not all Alabama lenders offer these programs
Step-by-Step Buying Process for Alabama First-Time Home Buyers
| Step | What to Do | Notes |
|---|---|---|
| 1 | Check your credit score | You need at least 640 for First Step or Step Up. |
| 2 | Find an AHFA-participating lender | Not all Alabama lenders offer AHFA programs. Ask specifically about First Step and Step Up eligibility. |
| 3 | Confirm income and purchase price limits | Limits vary by metro area and target/non-target designation — check your specific address with your lender. |
| 4 | Get pre-approved | Your lender will confirm which first mortgage type (FHA, VA, USDA, or HFA Advantage conventional) pairs best with your AHFA assistance. |
| 5 | Complete homebuyer education | Required for both First Step and Step Up before closing. |
| 6 | Shop for a home within program limits | Target-area max is $692,211; non-target max is $566,355 for First Step. Step Up has no stated cap. |
| 7 | Close on your loan | Your down payment assistance funds as a 10-year second mortgage alongside your 30-year fixed first mortgage. |
