The Alabama down payment assistance guide
Program and regulatory figures verified October 5, 2026. Details change; confirm your scenario with us.
Everything on this site in one place, in the order a buyer meets it. Every figure carries the AHFA document it came from and the date we read it.
Start with what the money actually is
Alabama's down payment assistance is not a grant and it does not sit quietly behind your mortgage. AHFA's own First Step FAQ asks whether the second is forgivable and answers: "No. The AHFA 2nd mortgage is an amortizing loan with a monthly payment. The term is 10 years, and the interest rate is the same rate as the first mortgage."
Ten years of payments, at your mortgage rate, counted in your debt ratio. That is a fair deal when you need the cash and a poor one when you do not — and AHFA confirms you can decline it and bring your own down payment. When to take it.
The one exception is the Affordable Income Subsidy Grant, which is a genuine grant. How to get it.
What is on offer
| Programme | Assistance | Repaid? | Income limit | Price cap | First-time? |
|---|---|---|---|---|---|
| First Step | 4% / $10,000 + below-market rate | Monthly, 10 yrs | $89,500–$161,140 | $566,355 / $692,211 | Yes* |
| Step Up | 4% / $10,000 | Monthly, 10 yrs | $172,800 | None | No |
| Income Subsidy Grant | 1% or 0.5% of the loan | Never | 80% AMI | — | No |
* Waived in a targeted area, or by the veterans exemption. Each in full · Choosing between the first two.
Will you qualify?
Credit and ratio first. 640 and 45%, flat across all three programmes. The assistance payment counts inside that 45%. Detail.
Then income — and which test applies depends entirely on the programme. Step Up is $172,800 regardless of household size or location. First Step runs a HUD area table from $89,500. The grant uses Freddie Mac's 80% AMI. Only borrower income counts in all three. The tables · Whose income.
Then ownership history, but only on First Step: no principal residence in three years, unless the address is targeted or you use the veterans exemption. Targeted areas.
Then the property: an Alabama home, occupied within 60 days, never rented or transferred, never investment or vacation use. The full checklist.
The requirement that catches people
Homebuyer education, on every programme. AHFA's consumer page lists it for Step Up and leaves it off First Step; its Lender Notice of 04.08.26 says it is "required for all" AHFA programmes and quotes the First Step Manual doing so. Certificate dated within a year of reservation, completed before closing. What counts.
The costs nobody mentions
Two, both on First Step:
- A commitment fee wired to AHFA within 72 hours of reservation — 0.50% of the loan on a 30-day lock, 0.75% on 45 days. Detail.
- Federal recapture tax exposure on a sale within nine years — and refinancing does not clear it. How it works.
Step Up carries neither.
Where you are buying changes the answer
First Step's income limits vary by area, and 55 of Alabama's 67 counties sit in the lowest row. Targeted status changes the limits and decides whether a repeat buyer gets in at all.
Birmingham and Jefferson County · Huntsville and Madison County · Mobile, Baldwin and the Gulf Coast.
Why every figure carries a date
Because agency figures move. Income and sales price limits on this site are effective 6/24/2026; programme terms come from AHFA's published pages and its First Step FAQ, read 2026-10-05; the education requirement comes from Lender Notice 04.08.26.
Where AHFA's own documents disagree — and on homebuyer education and on repeat buyers, they do — we follow the more specific one and say which. How we source this.
Frequently asked questions
How does down payment assistance work in Alabama?
AHFA attaches a second mortgage to a 30-year fixed first mortgage. First Step and Step Up both provide 4% of the sales price up to $10,000. That second is a 10-year amortizing loan with a monthly payment at the same interest rate as the first mortgage, not a grant. The separate Affordable Income Subsidy Grant is never repaid.How much down payment assistance can I get in Alabama?
4% of the sales price up to a maximum of $10,000, on either First Step or Step Up. Because 4% of $250,000 is $10,000, the percentage only governs below a $250,000 purchase price. The Affordable Income Subsidy Grant adds 1% or 0.5% of the loan amount toward closing costs on HFA Advantage conventional loans.What income do I need to qualify for Alabama down payment assistance?
It depends on the program. Step Up allows $172,800 regardless of household size or location. First Step uses HUD area limits effective 6/24/2026, from $89,500 for one to two people in a non-targeted area in most counties up to $161,140 for three or more in a targeted area of Huntsville. Only borrower income is counted.Is Alabama down payment assistance forgiven over time?
No. AHFA states the second mortgage is not forgivable and is an amortizing loan with a monthly payment over a 10-year term at the same rate as the first mortgage. Only the Affordable Income Subsidy Grant is never repaid.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.