Alabama’s housing market offers a wide range of opportunities, with home prices and availability varying across cities like Birmingham, Huntsville, Mobile, and surrounding communities. For first-time buyers looking to enter the market, understanding available financial support is just as important as researching neighborhoods and mortgage options.
One major resource is Alabama’s selection of down payment assistance (DPA) programs available at the state, county, and city levels. These include grants, forgivable loans, and second mortgages that can help reduce the upfront cost of buying a home.
This article highlights some of the most accessible and widely used DPA programs across Alabama. While it doesn’t cover every local option, it focuses on programs that are currently active and funded. We’ll continue updating this page as new programs are introduced or updated.
What Is AMI?
“AMI” stands for “Area Median Income” and it’s a term you’ll see frequently used by down payment assistance programs. In many cases, AMI is used to determine eligibility, with applicants required to earn no more than a certain percentage of the median income in the area where they're planning to buy.
Example: A DPA program requires that you make 100% or less of AMI. You're purchasing a home where AMI is $95,000 per year. You make $90,000 per year, so you meet the program's income requirements.
You can look up AMI by property address using Fannie Mae’s map tool.
Statewide Down Payment Assistance Programs
Alabama offers several statewide DPA options, most of which are managed through the Alabama Housing Finance Authority (AHFA). These programs are widely accessible, and some can be combined with grants or tax credits.
Step Up Program
The Step Up Program offers up to 4% of the purchase price (up to $10,000) in down payment assistance via a 10-year second mortgage, which is paid concurrently with your primary mortgage. This makes it easier for moderate-income buyers to get into a home without having to wait years to save.
Eligibility: Open to first-time and repeat buyers with a minimum credit score of 640, a maximum DTI of 45%, income of $172,800 or less, and completed homebuyer education.
First Step Mortgage Revenue Bonds
The First Step Mortgage Revenue Bond Program provides below-market interest rates and optional down payment assistance equal to the lesser of 4% of the sales price or $10,000. The assistance is secured by a 10-year second mortgage paid alongside the 30-year fixed-rate first mortgage.
Eligibility: In non-target areas, borrowers must be first-time buyers; repeat buyers may qualify in target areas. Borrowers need a minimum credit score of 640, a DTI of 45% or less, and income within the applicable federal limits. For 2026, the sales price limit is $566,355 in non-target areas and $692,211 in target areas.
Affordable Income Subsidy Grant
The Affordable Income Subsidy Grant provides closing cost assistance for eligible borrowers using Freddie Mac’s HFA Advantage loan through AHFA. Borrowers at or below 50% of AMI receive 1% of the loan amount, while those earning 50.01% to 80% of AMI receive 0.5% of the loan amount.
Eligibility: Borrowers must use an AHFA First Step or Step Up mortgage with Freddie Mac’s HFA Advantage product and have qualifying income no higher than 80% of AMI.
FHLBank Atlanta AHP Homeownership Set-aside First-Time Homebuyer Product
The FHLBank Atlanta AHP Homeownership Set-aside First-Time Homebuyer Product offers up to $17,500 in direct subsidy through participating member institutions for down payment and closing costs. The assistance carries a five-year retention period, and a sale, transfer, refinancing, or change in occupancy during that period may trigger prorated repayment.
Eligibility: Buyers must be first-time homebuyers, earn no more than 80% of AMI, contribute at least $1,000 of their own funds, and complete homebuyer counseling.
FHLBank Atlanta Workforce Housing Plus+ Program
The FHLBank Atlanta Workforce Housing Plus+ Program offers up to $15,000 in direct subsidy through participating member institutions. The assistance does not carry a security or retention requirement, but it cannot be combined with another AHP Homeownership Set-aside award.
Eligibility: First-time and repeat buyers may qualify with income between 80.01% and 120% of AMI. Buyers must contribute at least $1,000 and complete homebuyer counseling. Funds are available on a first-come, first-served basis.
Down Payment Assistance Programs by County
Most counties in Alabama don’t offer their own DPA programs, but Mobile County stands out with two options for income-qualified buyers.
Mobile County CDBG-DR Homeownership Down Payment Assistance
The Mobile County CDBG-DR Homeownership Down Payment Assistance Program provides $1,000 to $50,000 in need-based assistance for eligible properties in designated areas of Mobile County outside the City of Mobile. The assistance is a no-interest, deferred junior loan that is forgiven monthly over a term of up to 10 years while the buyer owns and occupies the home as a principal residence.
Eligibility: Applicants must have lived in Mobile County when Hurricane Sally or Hurricane Zeta occurred. Income may be as high as 120% of AMI, with priority given to low- and moderate-income applicants. Buyers must contribute at least $500, retain one month of mortgage-payment reserves, and have a DTI of 43% or less. Assets above $15,000 reduce the award. Geographic and flood-related restrictions apply, so buyers should confirm that the property address is eligible.
Mobile County HOME Down Payment Assistance
The Mobile County HOME Down Payment Assistance Program offers $1,000 to $25,000 toward down payment and closing costs in eligible Mobile County HOME Consortium areas outside the City of Mobile and Dauphin Island. The assistance is a 0% deferred junior loan, with one-sixtieth of the balance forgiven each month over five years while the buyer continues to own and occupy the home as a principal residence.
Eligibility: Buyers must meet the program’s first-time homebuyer requirement or qualify for an allowed exception, earn no more than 80% of AMI, contribute at least $500, and have a DTI of 43% or less. Assets above $10,000 reduce the award.
Down Payment Assistance Programs by City
Several cities in Alabama offer their own DPA programs, especially larger cities like Birmingham, Huntsville, and Mobile. These programs are often HUD-funded and offer forgivable loans or grants for eligible residents.
Birmingham Ready to Own Program
The Birmingham Ready to Own Program provides up to $10,000 in down payment and closing cost assistance via a 0% interest forgivable loan. The assistance is forgiven over five years and is subject to a restrictive covenant.
Eligibility: Buyers must purchase within Birmingham city limits, earn no more than 80% of AMI, have a minimum credit score of 600, and complete homebuyer education.
Huntsville Homeownership Assistance Program
The City of Huntsville’s Homeownership Assistance Program provides up to $24,999 or 10% of the purchase price, whichever is less, based on the buyer’s need. Funds may be used for the down payment, closing costs, an interest-rate buydown, or principal reduction. The assistance is a five-year deferred loan, with 20% forgiven on each anniversary of the closing date.
Eligibility: The program serves eligible first-time buyers purchasing within Huntsville city limits. The property must remain the buyer’s principal residence for at least five years.
City of Mobile First-Time Home Buyers’ Program
The City of Mobile First-Time Home Buyers’ Program offers up to $15,000 in down payment and closing cost assistance. The loan is fully forgiven after five years if the buyer retains ownership and occupies the home as a principal residence throughout that period.
Eligibility: Buyers must be first-time homebuyers, meet the program’s current income limits, complete the required homebuyer counseling, and purchase within Mobile city limits.
Decatur H.O.M.E. Program
The Decatur Home Ownership Made Easier Program provides up to $15,000 as a forgivable loan that may be used for closing costs, principal reduction, or an interest-rate buydown.
Eligibility: Applicants must meet the City of Decatur’s current buyer, income, property, and financing requirements.
Additional Alabama Down Payment Assistance Programs
Here are some other helpful resources and programs that may assist with down payment costs. These programs are still active and available in Alabama, but weren’t featured above.
Statewide Programs
- Chenoa Fund (Nationwide program available in Alabama)
City Programs
Final Thoughts on Alabama DPA
Alabama offers a strong network of down payment assistance programs that can make a real difference for homebuyers. While the specific options vary by location and income level, many provide valuable support through grants, forgivable loans, or subsidized mortgage options. Staying informed about the current mortgage rates and using our loan calculators can help you better understand your financial position. By taking the time to explore these programs, you may be able to reduce your upfront costs and move into a home sooner.
Check with the organization directly for the most recent guidelines. While programs were fact-checked at the time of writing, requirements change often, and programs become unavailable when funds are exhausted.
