Everything AHFA checks, and the order it matters in
Program and regulatory figures verified October 5, 2026. Details change; confirm your scenario with us.
Most of AHFA's rules are the same across all three programmes. What actually varies is the income test and whether you have owned before.
The rules that apply to everything
| Test | Requirement |
|---|---|
| Credit score | 640 or higher |
| Debt-to-income | 45% or lower |
| Homebuyer education | Required, certificate dated within a year of reservation |
| Purpose | Purchase only — refinancing does not qualify |
| Property | New or existing home in Alabama |
| Occupancy | Primary residence within 60 days of closing |
| Products | FHA, VA, USDA or HFA Advantage conventional |
| How | Through a participating lender |
The 640 and 45% are firm and identical across First Step, Step Up and the grant. What they mean in practice.
Which income test applies to you
This is where the programmes diverge, and it is the first thing to establish because it decides which door you are walking through.
| Programme | Income test | Varies by |
|---|---|---|
| Step Up | $172,800 | Nothing — any size, any county |
| First Step | $89,500–$161,140 | Area, household size, targeting |
| Income Subsidy Grant | 80% of AMI | County (Freddie Mac limits) |
In all three, only borrower income counts, never the whole household. And why that limits who can be on the deed.
Have you owned a home before?
Only First Step asks. A first-time homebuyer is someone with no ownership interest in a principal residence in the three years prior to execution of the initial loan application.
Three ways past it:
- Buy in a targeted area — first-time and repeat buyers both eligible.
- Use the veterans exemption — veterans and their spouses are exempt statewide, if the veteran has not financed a home using MRB and was not dishonorably discharged.
- Use Step Up, which has no first-time requirement at all.
In non-targeted areas AHFA evidences first-time status from the 1003, the tri-merge credit report and a Drive, Fraud Guard or MERS report. That documentation is not required in targeted areas. Checking an address.
What the property has to be, and stay
AHFA's property conditions run for the life of the loan, not just to closing.
- It must be your principal residence, occupied within 60 days of closing.
- It cannot be rented, leased, quit claimed or interest transferred at any time.
- It cannot be investment, seasonal, recreational or vacation property.
- Business use is prohibited.
Mike's view: take the "at any time" seriously. An AHFA loan is not a stepping stone to a rental, and a borrower planning to keep the house and let it when they move should say so at the start rather than discover the restriction later.
★ Who can be on the deed
Only the people who sign both the note and the mortgage. AHFA ties this directly to the income rule: since eligibility rests on borrower income alone, letting a non-borrower onto title would make the income test meaningless.
So a parent who helps with the down payment but is not on the loan cannot be added to the deed. If they need to be on title, they need to be on the note — and then their income is counted. Settle this before you reserve. The detail.
First Step adds four things
If you are going the bond route, these apply on top of everything above:
- Sales price limits — $566,355 non-targeted, $692,211 targeted. Detail.
- A commitment fee of 0.50% or 0.75%, wired within 72 hours of reservation. Detail.
- Federal recapture tax exposure on a sale within nine years. Detail.
- Tax-Exempt Riders signed, notarized and recorded with the first lien mortgage.
And the assistance itself
If you take it, it is a 10-year amortizing second mortgage at the same rate as your first, with a monthly payment that counts inside the 45% ratio. There is no standalone second; it is reserved with the first.
AHFA sets no minimum required investment from the borrower on any programme, and the second is optional — "they can bring their own downpayment to closing." When to take it and when not to.
Frequently asked questions
What are the requirements for Alabama down payment assistance?
Every AHFA program requires a 640 minimum credit score, a debt-to-income ratio of 45% or lower, homebuyer education before closing, an Alabama home occupied as a primary residence within 60 days of closing, and application through a participating lender. Refinancing does not qualify. Income limits differ by program.Who counts as a first-time homebuyer in Alabama?
Someone with no ownership interest in a principal residence in the three years prior to execution of the initial loan application. The requirement applies to First Step only, is waived in targeted areas and for veterans using AHFA's exemption, and does not apply to Step Up at all.Can I rent out a home bought with AHFA assistance?
No. AHFA states the property cannot be rented, leased, quit claimed or its interest transferred at any time, and cannot be investment, seasonal, recreational or vacation property. Business use is prohibited.How soon must I move into an AHFA home?
Within 60 days of closing. The property must be bought in Alabama and occupied as your primary residence within that window, on every AHFA program.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.