Step Up
Alabama Housing Finance Authority (AHFA)
Amount: Down payment/closing cost assistance of 4% of the home's sales price, up to $10,000 maximum, structured as a 10-year second mortgage paired with a 30-year fixed-rate first mortgage
Type: Second mortgage (down payment assistance) — market-rate program, not bond-financed; no purchase price cap
Statewide household income limit of $172,800 or less (regardless of family size or location, per AHFA's official program page); minimum credit score of 640 (680 for HFA Advantage conventional loans above 80% Area Median Income); maximum debt-to-income ratio of 45%; required completion of a homebuyer education course; can be used with FHA, VA, USDA, or HFA Advantage conventional loans on new or existing owner-occupied homes in Alabama, occupied within 60 days of closing. Open to both first-time and repeat buyers. Note: some third-party sites (SoFi, mortgage blogs) cite older/lower income figures ($130,600–$159,200) — the $172,800 figure is what AHFA's own program page currently states.
First Step (Mortgage Revenue Bond Program)
Alabama Housing Finance Authority (AHFA)
Amount: Same down payment assistance structure as Step Up — up to $10,000 or 4% of sales price (whichever is less), via a 10-year second mortgage; primary benefit is a below-market fixed interest rate on the 30-year first mortgage because it is funded through tax-exempt mortgage revenue bonds
Type: Mortgage revenue bond program with down payment assistance
Must be a first-time homebuyer (defined as not having owned a home in the prior three years) in non-target areas; first-time or repeat buyers allowed in designated 'target' areas. Minimum credit score 640; maximum DTI 45%. Income and home sales price limits vary by county/metro area and are tied to Area Median Income — for example (effective 6/24/26), Birmingham-Hoover HMFA non-target limits are $104,100 (1-2 person households) / $119,715 (3+ persons), while target-area limits are higher ($124,920/$145,740); other metro areas (Huntsville, Auburn-Opelika, Daphne-Fairhope-Foley, Tuscaloosa, Florence-Muscle Shoals) and all remaining counties have their own published limits. Usable with FHA, VA, USDA, or HFA Advantage conventional loans on owner-occupied primary residences.
Mortgage Credit Certificate (MCC)
Alabama Housing Finance Authority (AHFA)
Amount: Federal tax credit equal to up to 50% of annual mortgage interest paid, capped at $2,000 per year; remaining interest still deductible as a standard mortgage interest deduction; can be taken as an annual credit at tax filing or as an immediate monthly income boost for loan-qualifying purposes
Type: Federal income tax credit (not a cash grant), can be combined with the Step Up program for added purchasing power
Must be a first-time homebuyer (no home ownership in the prior three years) OR be purchasing a home in a federally designated 'target area' (which waives the first-time buyer requirement); must meet federally established income limits and home sales price limits based on area median income (limits updated periodically, e.g. AHFA announced new sales price limits effective March 2026).