The First Step cost almost nobody mentions
Program and regulatory figures verified October 5, 2026. Details change; confirm your scenario with us.
This is a real line item on a First Step file, it is set by a decision made at reservation, and almost no Alabama page discussing the programme mentions it exists.
What it is
A fee AHFA charges to commit bond funds to your loan. From the First Step FAQ:
"Is there a Commitment Fee associated with the First Step Program? Yes. The Commitment Fee must be wired to AHFA within 72 hours of the loan reservation. The fee is based on the reservation period: 30-day reservation = .50% of the total loan amount; 45-day reservation = .75% of the total loan amount. A commitment fee is not required for the 2nd mortgage."
| Reservation period | Fee | On a $200,000 loan | On a $250,000 loan |
|---|---|---|---|
| 30 days | 0.50% | $1,000 | $1,250 |
| 45 days | 0.75% | $1,500 | $1,875 |
Why it deserves its own page
Because the extra fifteen days costs 50% more, and that is a decision somebody makes on your behalf at reservation — often before you have thought about it.
The arithmetic is not subtle. On a $250,000 loan the difference between a 30-day and a 45-day reservation is $625. That is real money set by a scheduling choice, and the choice is usually driven by how confident everyone is about the closing date.
It is also worth weighing against what First Step is giving you. The below-market bond rate is worth considerably more than the fee over thirty years, so this is not an argument against the programme. It is an argument for a realistic closing timeline, and for asking which reservation period your file is going on.
The 72-hour clock
The fee is wired to AHFA within 72 hours of the loan reservation, not at closing. That is unusually early in the process and is worth knowing in advance, because it lands while you are still in the first week of a contract.
Practical consequence: ask your lender how the fee is handled on your file and when, so it does not arrive as a surprise alongside the appraisal and inspection in the same fortnight.
Nothing on the second mortgage
AHFA says it twice in the FAQ — once under the commitment fee question and again under the second mortgage questions: "There is no commitment fee associated with the 2nd mortgage."
So if you take the 4% / $10,000 assistance, that second loan adds no commitment fee of its own. It does add a monthly payment for ten years, which is the cost that actually matters. What the second costs.
Does Step Up carry one?
AHFA publishes the commitment fee under First Step, which is the bond programme the fee exists to serve — it is the cost of committing a bond allocation. We have not found AHFA publishing an equivalent fee for Step Up, and we are not going to assert one it has not published.
If you are comparing the two on total cost rather than on eligibility, ask your lender to confirm the fee schedule on the specific programme your file is going into. The comparison.
The other First Step-only paperwork
Two more things attach to First Step and not to Step Up, both procedural rather than expensive:
- Tax-Exempt Riders must be signed, notarized and recorded with the first lien mortgage. There are no riders on the second.
- First-time buyer documentation — the 1003, tri-merge credit report and a Drive, Fraud Guard or MERS report — is required when buying in a non-targeted area. Targeted areas.
Frequently asked questions
Is there a fee for the AHFA First Step program?
Yes, a commitment fee wired to AHFA within 72 hours of the loan reservation. It is 0.50% of the total loan amount on a 30-day reservation and 0.75% on a 45-day reservation. There is no commitment fee on the second mortgage.How much is the AHFA commitment fee?
0.50% of the total loan amount for a 30-day reservation, or 0.75% for a 45-day reservation. On a $200,000 loan that is $1,000 or $1,500, and on a $250,000 loan $1,250 or $1,875.When is the AHFA commitment fee due?
Within 72 hours of the loan reservation, wired to AHFA. That is early in the process rather than at closing, so it lands during the first week of a contract.Is there a commitment fee on the AHFA second mortgage?
No. AHFA's First Step FAQ states twice that no commitment fee is required for the second mortgage. The second does carry a monthly payment for its 10-year term, at the same interest rate as the first mortgage.Mike Certo · NMLS #260555 · Cornerstone First Mortgage NMLS #173855 · Equal Housing Lender. Educational content about financing, not a loan commitment and not legal or tax advice. AHFA program terms, income limits and sales price limits are set by the Alabama Housing Finance Authority and change; figures here carry the date we verified them against AHFA's published documents. AHFA down payment assistance is an amortizing second mortgage with a monthly payment, not a grant. Federal recapture tax may apply on First Step bond loans; consult a tax advisor. Loans are subject to borrower and property qualification.