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FHA Loans in Alabama

The great state of Alabama has a lot to offer potential homebuyers, but AL is perhaps best known for college football. It's no secret Alabamians take their football very seriously, and if you’re a football fanatic, buying a house in the Heart of Dixie is a no-brainer.

Unfortunately, the home financing process isn’t always as straightforward as finding where you want to live, and many Alabamians are left puzzled when it comes time to pick the right home loan. This is where Alabama FHA loans come in. Take a look at the information below to see if an FHA loan is the right option for you.

Why consider an FHA Loan in Alabama

Whether you’re looking to purchase a home in Birmingham, Mobile, Montgomery or Huntsville, choosing a reliable mortgage is an important decision. Many residents of Sweet Home Alabama chose an FHA loan, and as of April 2019 the total value of FHA loans in Alabama was $181 million!

Benefits of FHA Loans in AL

  • FHA loans are great for first-time homebuyers, especially those who can’t or don’t want to make a large down payment
  • FHA mortgage rates are typically lower than conventional mortgage rates
  • FHA down payment and credit score requirements are typically lower than conventional loans
  • Sellers can contribute up to 6% of the purchase price or appraised value (whichever is less) towards the buyers’ closing costs
  • FHA loans are assumable.

FHA Loan Limits in Alabama

While there is a maximum loan limit on Alabama FHA loans, the goal of the program is to ensure most people can qualify for the loan and purchase a house, regardless of the area in which they live. The maximum loan limit typically varies from location to location and is adjusted every year. For example, for most of Alabama the loan limit is $498,257. Check out the table below for a full list of loan limits in Alabama for 2024.

Alabama FHA Loan Limits by County

County FHA Loan Limit
Hale $498,257
Pickens $498,257
Tuscaloosa $498,257
All other areas $498,257

Are You Eligible for an FHA Loan in AL?

You may be eligible for an FHA loan, if you:

  • Have 2 years of steady employment, preferably with the same employer.
  • Have had steady income (or increasing income) in the past two years.
  • Have had less than two 30-day periods of late payments on your credit report.
  • Have declared bankruptcy no less than two years ago and have maintained good credit since.
  • Have not been a party in a foreclosure for at least three years and have maintained good credit since.
  • Anticipate your mortgage payment will be equal to or less than 30% of your gross income.

What Do You Need to Apply for an FHA Loan in AL?

Buyers must be able to provide the following information and documents as requested by lenders:

  • The addresses of all your residences over the past two years.
  • The names of your employers over the past two years.
  • W2's for the past two years and current paycheck stubs.
  • Your current gross monthly salary.
  • Your Social Security Number.
  • Names, addresses, and account numbers with balances on all checking and savings accounts.
  • Addresses and loan information of any other real estate you owned.
  • Self-employed individuals will need to provide personal tax returns for the past two years and a current income statement and balance sheet for the business.
  • Students will need to provide evidence of enrollment. If you have student loans, you need to provide verification information.

Note: Facts and figures sourced from the latest statistics available at the time of this writing including data from the United States Department of Labor, United States Census Bureau and the United States Department of Housing and Urban Development.