For many homebuyers across Alabama, qualifying for a mortgage isn’t the hardest part of buying a home, it’s coming up with the cash needed for the down payment and closing costs. Even buyers with steady income and solid credit often find that upfront costs delay their plans for homeownership.
The First Step Program from the Alabama Housing Finance Authority helps solve that problem by offering low-interest mortgage options paired with down payment assistance to reduce upfront costs.
What This Program Offers
The First Step Program provides financial assistance specifically designed to lower the cash required at closing while also offering favorable financing terms.
Key program benefits include:
- Low fixed interest rates on 30-year mortgages
- Down payment assistance of up to $10,000 or 4% of the purchase price (whichever is lower)
- Assistance is structured as a 10-year second mortgage
- Compatible with FHA, VA, USDA, and Freddie Mac HFA Advantage conventional loans
- Potential eligibility for an additional Affordable Income Subsidy Grant (for qualifying conventional borrowers)
Because the assistance is paired with a long-term mortgage and spread over time, buyers can significantly reduce upfront costs while maintaining manageable monthly payments.
Who This Program Is Designed For
The First Step Program is designed for buyers who are ready to purchase a home but need support covering upfront expenses.
This program may be a good fit for:
- First-time homebuyers entering the market
- Buyers looking for lower interest rate mortgage options
- Households with stable income but limited savings
- Buyers seeking both down payment assistance and potential grant opportunities
The program is available statewide, with eligibility based on income limits and property location.
Eligibility Snapshot
While exact limits vary depending on location and household size, typical program guidelines include:
- Meeting federally established income and purchase price limits
- Purchasing a home in an eligible target or non-target area
- Meeting standard creditworthiness requirements
- Occupying the home as a primary residence
- Property cannot be used for business, commercial, or rental purposes
Both new and existing homes are eligible under the program.
Who Should Take Action
Buyers who are financially prepared to purchase a home but want to reduce both their interest rate and upfront costs should consider exploring this program.
For many households, combining down payment assistance with favorable loan terms, and in some cases additional grants, can make homeownership more accessible and sustainable.
What to Do Next
If you’re considering buying a home in Alabama, ask a participating lender about the First Step Program from the Alabama Housing Finance Authority. A lender can help you determine eligibility, explain how the second mortgage works, and identify whether you qualify for additional grant opportunities.
The First Step Program is one of several assistance options available through AHFA. Depending on your financial profile and loan type, there may be additional programs that can further reduce your upfront costs.
Visit Homebuyer Wallet to explore other homebuyer programs that may be available to you.
