First-time home buyer programs in Alabama and Birmingham

AHFA programs at a glance

AHFA says its programs have helped more than 90,000 families buy a home since 1980. AHFA does not lend directly: you apply through a participating lender, and loans are serviced by AHFA’s servicing division.

Sources: AHFA program pages and “Am I Eligible?”, read October 13, 2026. The down payment funds are a 10-year second mortgage combined with the 30-year, fixed-rate first mortgage.

All AHFA loans must be FHA, VA, USDA or Freddie Mac HFA Advantage conventional loans. You must buy a home in Alabama and live in it as your primary residence within 60 days of closing. Refinancing does not qualify. For how these loan types work, see our guides to FHA loans and VA loans.

Who counts as a first-time buyer. In target areas, First Step is open to first-time and repeat buyers. In non-target areas, you must not have owned a home in the previous three years. A lender can tell you whether an address is in a target area, and AHFA offers an address search map.

Limits that apply in Birmingham

AHFA’s tables, effective for applications taken as of June 24, 2026, list the Birmingham-Hoover area, which covers Bibb, Blount, Shelby, Jefferson and St. Clair counties. The area median income used is $104,100.

Source: AHFA, “Income Limits” and “Sales Price Limits”, effective June 24, 2026. Income limits come from HUD and sales price limits from the IRS.

The 2024 Census median value of a home in the city of Birmingham is $189,800 (see Alabama home prices), far under the sales price limits. That median is an owner’s estimate, not a sale price.

AHFA posts its current rates on its website and says they can change without notice. On October 13, 2026, they were 6.750% for First Step with an FHA, VA or USDA loan and 7.250% for First Step conventional, and 7.500% and 8.000% for Step Up. Compare them with a standard loan before you decide.

An illustrative example

On a $189,800 purchase, 4% is $7,592, below the $10,000 cap. This shows how the cap works, not a quote: your lender confirms your rate, your eligibility and the amount of assistance.

Help from the City of Birmingham

The City’s Community Development department runs the Ready to Own program for qualified households buying a home within Birmingham city limits:

• Assistance of up to $10,000, as a 5-year forgivable loan at 0% interest, with a restrictive covenant.
• Funds can go toward the down payment, closing costs and interest rate buydowns.
• Minimum credit score of 600, household income at or below the current HUD limit at 80% of area median income, and a homeownership education course.
• A signed purchase agreement is required before funds are reserved.

The City’s page says a housing services partner handles client intake, case management, homebuyer education and closings. The department is at 710 North 20th Street, 10th Floor, Room 1000, and its phone number is (205) 254-2309. We did not find a statement on the City’s page or on AHFA’s pages about whether Ready to Own can be combined with First Step or Step Up, so ask your lender. We could not open the Jefferson County government site, so this page does not cover county programs.

How to apply

1. Pick a participating lender from the list on AHFA’s “How Do I Apply?” page, or use AHFA’s form to be matched with one.
2. Take the homebuyer education course if your program requires it. The City of Birmingham and AHFA’s Step Up program both do.
3. Ask the lender whether your target address falls in a target area, and for the income limit that applies to your household.
4. Compare the total cost with a standard loan. Our guides on closing costs and private mortgage insurance explain the other costs.

See also closing costs in Alabama and our page on buying a home in Birmingham.