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First Step

Statewide, Alabama

Last verified
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Assistance

4%

Of the purchase price, as the program sets it

Income limit

$120,960

The household income limit the program publishes

Price cap

$665,173

Highest purchase price the program allows

Repayment

Grant

Not repaid

What is First Step?

First Step is a grant for homebuyers in Statewide, Alabama.

  • First Step is AHFA's flagship Mortgage Revenue Bond program, providing a below-market 30-year fixed-rate first mortgage paired with up to $10,000 / 4% down payment assistance as a 10-year second mortgage. Available statewide for first-time buyers (or repeat buyers in IRS-designated target areas). Borrowers must meet HUD-set income limits and IRS-set sales price limits. Nearly 50,000 Alabama households have benefited from the program since 1980.
  • First Step pairs a below-market 30-year fixed-rate first mortgage (FHA, VA, USDA, or Freddie Mac HFA Advantage conventional) funded with tax-exempt mortgage revenue bonds with a down payment assistance second mortgage of up to $10,000 or 4% of the sales price, whichever is lower. The DPA is structured as a 10-year amortizing second mortgage combined with the 30-year first mortgage. Loans are serviced by ServiSolutions (a division of AHFA) so homeowners write only one check per month. Borrowers using the HFA Advantage conventional product may also qualify for the Affordable Income Subsidy Grant for additional closing-cost assistance.
  • Funding comes from Tax-exempt Mortgage Revenue Bonds issued by AHFA; loans serviced by ServiSolutions (an AHFA division).

How much assistance does it provide?

First Step provides assistance worth 4% of the purchase price, as set by the program.

  • Buyer contribution: No minimum borrower contribution stated by AHFA; loan-product overlays (FHA/VA/USDA/Freddie HFA Advantage) apply.
  • The program can be combined with other assistance, subject to the rules of each.
  • Amounts are the program's published maximums, not an offer — the administering agency determines any individual award.

Do you have to pay it back?

First Step is structured as a grant, so it is not repaid.

  • Repayment is triggered by 10-year amortizing second mortgage with monthly payments combined with the first mortgage and balance becomes due upon sale, refinance, or transfer of the property if not yet repaid.
  • The assistance is recorded in 2nd Lien position.
  • Forgiveness and repayment terms are set by the program and can change — confirm them on the official program page before applying.

Who qualifies?

First Step is open to first-time homebuyers and buyers who will live in the home as their primary residence.

The program requires

  • First-time homebuyer — with exceptions: Repeat homebuyers are eligible if the property is in an IRS-designated target area; otherwise borrower must not have had an ownership interest in a principal residence in the previous 3 years
  • The home is occupied as a primary residence
  • On credit: 640 minimum FICO for all loan products (FHA, VA, USDA, and HFA Advantage conventional)
  • A completed homebuyer education course, through Approved homebuyer education provider required (online or in-person); list available through participating lenders and AHFA
  • Residency: Property must be in Alabama and occupied as primary residence within 60 days of closing
  • Citizenship or immigration status: U.S. citizen or qualified non-citizen per agency loan-product guidelines
  • First-time homebuyer required in non-target areas (no homeownership in the previous 3 years); first-time-homebuyer requirement is waived in IRS-designated target areas. Borrowers must occupy as primary residence within 60 days of closing. Property may not be used for business, commercial, or rental purposes. Federal recapture tax may apply to the bond-funded first mortgage if the home is sold within 9 years and the borrower's income has increased significantly. AHFA's First Step income limits are tied to HUD area median family income (AMFI) but are set by IRS bond rules at HUD AMFI for non-target Family 1-2 (e.g., All Other Counties = $86,400) and 115% of AMFI for non-target Family 3+ ($99,360); target-area limits are 120%/140% of AMFI. The 4-person figure of $120,960 (target, All Other Counties) is meaningfully higher than HUD 2025 4-person AMI for many rural Alabama counties (~$70K-$80K), reflecting the bond-program 120% adjustment.

The program excludes

  • Purchases above the $665,173 price cap
  • Households above $120,960

These are the program's own published rules, not a decision about any individual — the administering agency and a lender determine who actually qualifies.

What are the income limits?

First Step limits household income to $120,960.

  • The limit applies to total household income, not only the borrower’s.
  • Area median income figures are published by HUD and updated annually, so check the current table for the county before relying on a number.

What kind of home can it be used for?

First Step caps the purchase price at $665,173.

  • Eligible property types include Single-family detached, townhomes, condos (must meet agency approval), 2-4 unit per IRS bond rules limited (typically 1-unit owner-occupied), manufactured housing per agency guidelines.
  • New construction is eligible.
  • Manufactured homes are eligible.

Where does it apply?

First Step serves buyers purchasing in Statewide, Alabama.

  • The program targets specific areas: IRS-designated qualified census tracts and areas of chronic economic distress in Alabama. In target areas, first-time-homebuyer requirement is waived and higher income/sales price limits apply. Use AHFA's Target Area Status Map to verify a property's status: https://www.ahfa.com/programs/homeownership/available-programs/first-step-mortgage-revenue-bonds/targetnon-target-maps.

How do you apply?

Applications for First Step go through the administering agency, which publishes the current terms and the application steps on its own site.

  1. Take a homebuyer education course

    Required by the program, through Approved homebuyer education provider required (online or in-person); list available through participating lenders and AHFA.

  2. Contact the administering agency to reserve funds

    Funds are reserved through Lender reserves rate/funds via AHFA's online lender portal (AllRegs/lender system) on a first-come, first-served basis, and are subject to availability.

  3. Work with a lender who handles the program

    Hey Prescott is not a lender and does not accept applications; this page describes the program so a buyer can take it to a lender or housing counselor.

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