First Step or Step Up: the money is identical, the gate is not
Program and regulatory figures verified October 5, 2026. Details change; confirm your scenario with us.
Every Alabama comparison I can find treats these as two sizes of assistance. They are the same size. They are two different doors into it, and most people can only open one.
The assistance is the same. Start there.
First Step and Step Up both provide 4% of the sales price, capped at $10,000, secured by a 10-year amortizing second mortgage at the first mortgage's rate. Not similar — the same.
So nobody should choose between them on amount, and any page ranking them by generosity has misunderstood the programmes. What that second mortgage costs you.
What actually differs
| First Step | Step Up | |
|---|---|---|
| Assistance | 4%, max $10,000 | 4%, max $10,000 |
| First mortgage rate | Below market (bond funded) | Market |
| Income limit | HUD county table, from $89,500 | $172,800 flat |
| Varies by household size | Yes (1–2 and 3+) | No |
| Varies by county | Yes | No |
| Sales price limit | $566,355 / $692,211 | None published |
| First-time buyer | Required unless targeted area or veteran | Not required |
| Recapture tax | Yes — bond funded | No |
| Commitment fee | 0.50% / 0.75% within 72 hours | — |
| Tax-Exempt Riders recorded | Yes | — |
| Loan products | FHA, VA, USDA, HFA Advantage conventional | |
| Credit / DTI | 640 minimum / 45% maximum | |
| Homebuyer education | Required on both | |
How big is the income gap, really?
Large enough to decide the question for most Alabama households. Step Up's single figure sits well above First Step's limit everywhere in the state, and furthest above it in the 55 counties that fall into the "All Other Counties" row.
| Where you are buying | First Step, 1–2 people, non-target | Step Up | Difference |
|---|---|---|---|
| Most of Alabama | $89,500 | $172,800 | $83,300 |
| Huntsville (Limestone, Madison) | $115,100 | $172,800 | $57,700 |
| Birmingham-Hoover | $104,100 | $172,800 | $68,700 |
| Tuscaloosa, Hale | $93,000 | $172,800 | $79,800 |
Even First Step's most generous cell — $161,140, for a household of three or more inside a targeted area of Huntsville — still sits $11,660 below Step Up's flat figure. The full table.
And the price cap only exists on one of them
First Step is bound by IRS sales price limits: $566,355 in non-targeted areas, $692,211 in targeted ones. AHFA publishes no sales price limit for Step Up.
Across most of Alabama that cap is not binding — Birmingham's typical value is $262,563 and Huntsville's $315,402. Where it starts to matter is on larger or newer homes in the stronger markets, and that is also where household incomes run highest. The two constraints tend to bite the same buyer at the same time, and Step Up releases both at once.
So why would anyone use First Step?
The rate. First Step is funded by tax-exempt mortgage revenue bonds, which is what lets AHFA price the first mortgage below market. Over thirty years that is worth considerably more than the $10,000 of assistance both programmes share.
That is the real decision: First Step is a cheaper first mortgage; Step Up is a wider door. If you fit inside First Step's income and price limits, and you are a first-time buyer or buying in a targeted area, take the cheaper money. If you do not fit, Step Up gives you the same $10,000 and does not care how many people live in your house or which county you are in.
Two things ride along with First Step that are worth weighing: recapture tax, which Step Up does not carry, and a commitment fee of 0.50% or 0.75% of the loan wired within 72 hours of reservation. How recapture works · The commitment fee.
Mike's read
Check First Step first, because the rate is the biggest number in the deal and it is the only thing here that compounds over thirty years. Check it against the right column of the table — targeted or non-targeted changes the limit by a fifth, and it changes whether a repeat buyer is allowed in at all.
If First Step says no, do not treat that as a no from Alabama. Step Up is not a consolation prize; it is the same $10,000 with a far wider gate, and a great many Alabama households who assume they earn too much for assistance are inside it. The $172,800 limit in detail.
Frequently asked questions
What is the difference between First Step and Step Up in Alabama?
The assistance is identical: both pay 4% of the sales price up to $10,000 through the same 10-year amortizing second mortgage. First Step offers a below-market bond rate but imposes HUD county income limits starting at $89,500, IRS sales price limits, a first-time buyer rule and recapture tax. Step Up allows $172,800 regardless of household size or location, has no published sales price limit, no first-time buyer rule and no recapture tax.Which Alabama program gives more down payment assistance?
Neither. First Step and Step Up both provide 4% of the sales price capped at $10,000, secured by the same 10-year amortizing second mortgage at the first mortgage's interest rate. The programs differ on eligibility and on the first mortgage rate, not on the assistance amount.Can I use Step Up if I already own a home?
Yes. Step Up carries no first-time homebuyer requirement. The property must still be purchased in Alabama and occupied as your primary residence within 60 days of closing, and refinancing an existing mortgage does not qualify for either program.Is there a purchase price limit for Step Up in Alabama?
AHFA publishes no sales price limit for Step Up. First Step is bound by IRS sales price limits of $566,355 in non-targeted areas and $692,211 in targeted areas, both effective 6/24/2026.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.