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Information on First Time Buyer Mortgages in Alabama

If you’re a first-time buyer, the wealth of available information on home mortgages can be a bit overwhelming. 

To help you out, here’s our comprehensive guide on mortgage loans for first-time homebuyers in Alabama.

What Is a Mortgage? 

Mortgage loans are used to buy a house, they are an agreement between you and a lender that states that they have the right to take your property if you fail to make payments. 

FHA Loans

FHA loans – a popular choice for a first-time buyer – are guaranteed by the U.S. Department of Housing and Urban Development, but FHA loans require applicants to have good or excellent credit, and, because of that, a lower down payment than a conventional loan. FHA loans must meet strict underwriting guidelines and provide borrowers a 30-year, fixed-rate mortgage at a specified rate and interest rate, with a specific down payment amount to maintain. An FHA loan doesn’t require any mortgage insurance for the first five years, but the additional cost of the mortgage insurance is added each year for the remaining 10 years.

VA Loans

If you have a qualifying income and credit score, these loan programs allow you to receive a low-interest loan versus a mortgage. This means you won’t be paying much in interest. You can get loan amounts up to $417,000 in the case of the VA loan, and you’ll typically be allowed to borrow up to 85% of the home’s value. Another great perk of VA loans is the fact that you can take advantage of no-money-down options on some VA loans, which saves you the cost of paying interest while you save money on the down payment. Mortgage Interest Rates For the record, the FHA and VA loans do not offer no-money-down options. The lowest mortgage rates available to first-time buyers in Alabama include 6.875% for FHA loans 4.

USDA Loans

The government issues the largest single mortgage loan, the USDA mortgage loan. If you’re buying a home that’s more than $417,000, it’s a good option to consider because:  

  • There are no down payments or closing costs to pay, or mortgage insurance premiums.
  • The minimum credit score is just 500 and it doesn’t matter if your credit history isn’t that great, USDA loans are pre-qualified.
  • You can qualify for a loan with a down payment as low as 3%.

Fannie Mae Loans

Fannie Mae loans are the easiest to get. You’ll find that more than half of first-time homebuyers don’t have to show proof of income. You’ll be able to get a mortgage that exceeds 100% of your annual income. You’ll have access to all of Fannie Mae’s products, from traditional loans to Home Affordable Refinance Program (HARP) refinances. Fannie Mae mortgages offer some of the most flexible loan terms available to borrowers.

Contact Local Home Buyers

If you’re a first-time buyer, hopefully, you found this guide helpful. If you’re looking to sell a property contact Local Home Buyers today, we buy homes in any condition in cash fast. Call us to get your no-obligation offer, and you could have cash in hand for your home in as little as seven days. We serve Madison County, Alabama. 

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