Saving for a down payment can be tough.
Even though there are a few 100% Financing options available in today's market, sometimes getting a mortgage will require at least a small down payment.
In a recent survey completed by NeighborWorks America, they noted that 62% of millennials and 73% of all consumers were either unaware or unsure about down payment assistance programs available in their community.
Here in Alabama, there are several down payment options available.
Alabama Housing Finance Authority
Alabama Housing Finance Authority, or AHFA, offers the Step Up program to homebuyers who can likely afford a mortgage, but just need help with the down payment.
The Step Up loan offers down payment assistance of 3% of the purchase price (up to a max of $7500). This amount is secured as a 10-year fixed rate 2nd mortgage. The interest rate for this 2nd mortgage is the same exact rate that is locked on the 1st mortgage. Interest rates are posted daily at AHFA.com.
See If You Qualify For An AHFA Step Up Loan
The Step Up program is available statewide to qualifying households making less than $97,300. The 3% down payment assistance can be used in conjunction with an FHA loan which typically requires 3.5% down, or a Conventional loan which requires just 3-5% down.
The AHFA Step Up loan does require a reservation fee, that is between 0.5 - 0.75% of the loan amount, and this fee can be paid by the borrower prior to closing or it can be paid by the lender and recouped at closing. If you do pay it out of pocket, it can be counted towards any remaining down payment or cash to close required.
Since this down payment assistance program is a true 2nd mortgage that requires repayment, many time we're asked about how the payments are made. The great news is that since both of these loans are ultimately serviced by the same company, you only have to write one check for both payments!
Local City and County Government Programs
Many local cities and municipalities have down payment assistance programs available.
For example, the City of Huntsville has a down payment assistance program that offers a $5000 grant to help with down payment and closing costs. This can be used in conjunction with any loan type.
For this program, you have to meet certain eligibility requirements and you need to be prepared to live in the home as your primary residence for 5 years.
There are also other cities and counties that offer similar programs, so just check with them in the local area where you're wanting to live before deciding to purchase a home.
Here are just a couple more we found that were also available in Alabama:
- Birmingham - Neighborhood Lift Program
- Mobile - Down Payment Assistance Grant
Do You Qualify For A Grant Program In Alabama?
If you have any more questions about down payment assistance programs, reach out to us or leave a comment below.