alabama fha lenders

Alabama FHA Loans –  Alabama FHA Lenders

Alabama is a wonderful state to live in with such diversity in people and landscape. There are miles of beautiful beaches along the Gulf of Mexico and also mountains to visit if you want to escape to a cooler climate. The people are inviting and you will really enjoy the southern hospitality from your welcoming neighbors as a new homeowner.

Alabama home buyers who need a small down payment or have poor credit scores may be able to purchase a home with an Alabama FHA loan. There are many FHA lenders in Alabama who offer FHA loans for people with credit scores as low as 500.

We have decades of experience in helping Alabama residents to purchase or refinance their homes. We will take you through the Alabama FHA loan requirements, detail what is needed to qualify, then help you to get pre-qualified. If you already know that an FHA loan is right for you, then click to connect with an Alabama FHA lender whether you live in Birmingham, Huntsville, Mobile, Montgomery, or anywhere else.

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What is an FHA Loan?

FHA loans are government backed mortgages for primary residences that are provided by approved FHA lenders and are insured from default by HUD. The eligibility guidelines are set by the Federal Housing Administration. FHA loans are geared towards first-time home buyers, individuals with a small down payment, or homebuyers with poor credit.

Benefits of FHA Loans in Alabama

These are the benefits of an FHA loan versus a conventional loan:

  • Lower credit scores permitted
  • Lower down payment requirement
  • FHA interest rates are lower than conventional rates
  • Gift funds allowed
  • Seller closing cost contributions are allowed
  • FHA loans are assumable
  • Co-signers allowed
  • Higher debt to income ratios permitted to help qualify for a larger loan amount

FHA loans are helping first time home buyers to qualify for a mortgage when they cannot meet conventional loan requirements. You may also find the interest rate for FHA loans are often lower than conventional. 

FHA Down Payment Requirements in Alabama

The down payment requirements for an FHA loan is the same in every state. The minimum requirement for an FHA loan is 3.5% of the purchase price. However, if your credit score is below 580, then the down payment requirement will be 10%.

If you do not have the down payment needed, you can also use gift funds from a relative.

Alabama Down Payment Assistance for FHA Financing

There are various down payment assistance programs in every state. Below is a list of just a few down payment assistance programs that may be available to you in Alabama. Home buyers will need to contact, and arrange for these programs independently. Lenders will accept the funds from these programs for your down payment but they will not arrange for down payment assistance.

Alabama Step Up Program

Mobile County Down Payment Assistance

In addition to the two options above, we also have the ability to provide you with lender down payment assistance. With this option, one of our FHA lenders may offer the down payment assistance as part of their complete package. Contact us to discuss.

Alabama FHA Loan Requirements for 2024

These are the basic FHA loan eligibility requirements for this year. All of these must be met to be approved for an FHA loan. If you are not positive on whether you meet these standards or have questions, an FHA lender can help.

  • Down payment of 3.5% or 10% if your credit score is below 580
  • 2-year employment history with some exceptions allowed
  • Fully document your income for the past two years
  • Minimum FICO score requirement of 500 – down payment will vary
  • Mortgage Insurance Premium (MIP) is required for every FHA loan
  • Maximum debt to income ratio of 43% with exceptions up to 56%
  • The home must be your primary residence
  • No bankruptcies or foreclosures in the past two years

Types of FHA Loans in Alabama

There are various types of FHA loans available in the state of Alabama for both purchases and also refinances. Each of these are for a specific situation that a home buyer or current homeowner may encounter. Although these programs are available, not every lender offers them and the ones who do may have their own unique requirements.

  • Standard Purchase
  • Standard Refinance
  • FHA 203k Rehab (when buying or refinancing)
  • FHA Streamline Refinance
  • FHA One Time Close Construction Loan
  • FHA Cash Out Refinance
  • FHA Energy Efficient Mortgage

We will review some of these government backed FHA programs below and will provide additional information.

Local Alabama FHA lenders

Although lenders who offer FHA loans are insured against default, you will find they may still have a conservative implementation of the FHA loan requirements. This means they may not allow for low credit scores, gaps in employment, or a high debt-to-income ratio.

We can help you with all of those scenarios with personal service nights and weekends. 

Let us help you to secure a mortgage to purchase or refinance a home in your area by completing this FHA loan scenario form with some basic loan scenario information. 

Loan Limits for FHA Loans in Alabama

Every county in the United States has specific maximum loan limits that are set for single family homes, as well as 2-4 unit properties. The limits are set based upon the average home sales value in that county. The base FHA loan limit for single family residences in Alabama for most counties is $498,257. Use this FHA loan limit lookup tool to see what the loan limits are in your county.

County Name Single Family 2 Units 3 Units 4 Units
AUTAUGA $498,257 $637,950 $771,125 $958,350
BALDWIN $498,257 $637,950 $771,125 $958,350
BARBOUR $498,257 $637,950 $771,125 $958,350
BIBB $498,257 $637,950 $771,125 $958,350
BLOUNT $498,257 $637,950 $771,125 $958,350
BULLOCK $498,257 $637,950 $771,125 $958,350
BUTLER $498,257 $637,950 $771,125 $958,350
CALHOUN $498,257 $637,950 $771,125 $958,350
CHAMBERS $498,257 $637,950 $771,125 $958,350
CHEROKEE $498,257 $637,950 $771,125 $958,350
CHILTON $498,257 $637,950 $771,125 $958,350
CHOCTAW $498,257 $637,950 $771,125 $958,350
CLARKE $498,257 $637,950 $771,125 $958,350
CLAY $498,257 $637,950 $771,125 $958,350
CLEBURNE $498,257 $637,950 $771,125 $958,350
COFFEE $498,257 $637,950 $771,125 $958,350
COLBERT $498,257 $637,950 $771,125 $958,350
CONECUH $498,257 $637,950 $771,125 $958,350
COOSA $498,257 $637,950 $771,125 $958,350
COVINGTON $498,257 $637,950 $771,125 $958,350
CRENSHAW $498,257 $637,950 $771,125 $958,350
CULLMAN $498,257 $637,950 $771,125 $958,350
DALE $498,257 $637,950 $771,125 $958,350
DALLAS $498,257 $637,950 $771,125 $958,350
DEKALB $498,257 $637,950 $771,125 $958,350
ELMORE $498,257 $637,950 $771,125 $958,350
ESCAMBIA $498,257 $637,950 $771,125 $958,350
ETOWAH $498,257 $637,950 $771,125 $958,350
FAYETTE $498,257 $637,950 $771,125 $958,350
FRANKLIN $498,257 $637,950 $771,125 $958,350
GENEVA $498,257 $637,950 $771,125 $958,350
GREENE $498,257 $637,950 $771,125 $958,350
HALE $498,257 $637,950 $771,125 $958,350
HENRY $498,257 $637,950 $771,125 $958,350
HOUSTON $498,257 $637,950 $771,125 $958,350
JACKSON $498,257 $637,950 $771,125 $958,350
JEFFERSON $498,257 $637,950 $771,125 $958,350
LAMAR $498,257 $637,950 $771,125 $958,350
LAUDERDALE $498,257 $637,950 $771,125 $958,350
LAWRENCE $498,257 $637,950 $771,125 $958,350
LEE $498,257 $637,950 $771,125 $958,350
LIMESTONE $498,257 $637,950 $771,125 $958,350
LOWNDES $498,257 $637,950 $771,125 $958,350
MACON $498,257 $637,950 $771,125 $958,350
MADISON $498,257 $637,950 $771,125 $958,350
MARENGO $498,257 $637,950 $771,125 $958,350
MARION $498,257 $637,950 $771,125 $958,350
MARSHALL $498,257 $637,950 $771,125 $958,350
MOBILE $498,257 $637,950 $771,125 $958,350
MONROE $498,257 $637,950 $771,125 $958,350
MONTGOMERY $498,257 $637,950 $771,125 $958,350
MORGAN $498,257 $637,950 $771,125 $958,350
PERRY $498,257 $637,950 $771,125 $958,350
PICKENS $498,257 $637,950 $771,125 $958,350
PIKE $498,257 $637,950 $771,125 $958,350
RANDOLPH $498,257 $637,950 $771,125 $958,350
RUSSELL $498,257 $637,950 $771,125 $958,350
SHELBY $498,257 $637,950 $771,125 $958,350
ST. CLAIR $498,257 $637,950 $771,125 $958,350
SUMTER $498,257 $637,950 $771,125 $958,350
TALLADEGA $498,257 $637,950 $771,125 $958,350
TALLAPOOSA $498,257 $637,950 $771,125 $958,350
TUSCALOOSA $498,257 $637,950 $771,125 $958,350
WALKER $498,257 $637,950 $771,125 $958,350
WASHINGTON $498,257 $637,950 $771,125 $958,350
WILCOX $498,257 $637,950 $771,125 $958,350
WINSTON $498,257 $637,950 $771,125 $958,350

FHA 203k Loans in Alabama

FHA 203k loans are a great program which will allow you to borrow the money needed to purchase the home plus additional funds needed to rehabilitate or remodel the home. This program is also available in your state and we work with lenders that help with your FHA 203k loan.

If you would like to fully understand how this program works, we suggest reading our article on FHA 203k loans.

FHA Streamline Refinance in Alabama

The FHA streamline refinance program is available to existing homeowners who would like to refinance for a lower interest rate while eliminating some of the closing costs such as an FHA appraisal. You may also get a discount on the mortgage insurance premium which is another advantage.

For more information, please read our article on the FHA streamline refinance.

FHA Cash Out Refinance

Another one of the popular government backed mortgage loans is the FHA cash out refinance. With this program, you are able to cash out up to 80% of the appraised value of the house. 

Lenders will verify eligibility by requiring borrowers to provide all of their financial info on the mortgage application. They will also verify the home’s value by requiring an FHA appraisal. 

Read more about the FHA cash out refinance program.

Alabama FHA Loan Pre-Approval Process

If you are looking for an FHA loan, there is an optimal process you should follow to get pre-approved.

  1. The first step is to make sure you have the minimum down payment needed to qualify
  2. check your credit and try to cleanup anything that is pulling down your scores
  3. Get a copy of your tax returns for the past two years
  4. Get copies of your pay stubs for the past month
  5. Get copies of your last two months’ bank statements
  6. Speak to an FHA lender about your loan scenario

Speak to a lender early in the process because they can identify opportunities to help with your FHA approval. This should be done months before you start looking for a home. Read more about how to get pre-approved for an FHA loan.

What to Look for in an Approved FHA Lender in Alabama 

We take a few things into consideration when looking at which lenders we work with. Some of these also may be, or should be very important to you as you continue shopping for an Alabama mortgage to finance your home.

A good FHA lender will:

  • Allow for credit scores as low as 500
  • Provide FHA 203k loans
  • Offer competitive interest rates, closing costs and origination fees
  • Have a great processing and underwriting team
  • Work closely with you throughout the loan process
  • Communicate well and will provide you with updates along the way
  • Help with your mortgage application questions

Alabama Loan Calculator

FHA Calculator
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Frequently Asked FHA Questions

Can I get an FHA loan with a bankruptcy?
In general, you will need to wait two years before applying for an FHA loan after a bankruptcy. However, there are some exceptions which may allow you to apply sooner. Read our article on the bankruptcy waiting period.

Are all FHA lenders the same?
Not all lenders who offer FHA loans are the same. They all do not offer all of the FHA programs and their rates and fees may also vary. Most importantly, the individuals who help to process and underwrite your loan will have a huge impact on your FHA loan experience.

Can I use gift funds for an FHA loan?
FHA loans do allow for gift funds to cover your down payment as well as your closing costs. The gift funds must come from a relative or a close friend as approved by the lender. You will need to provide the lender with a gift letter that is signed by the donor after you complete the FHA application.

Do I need an appraisal for an FHA loan?
The FHA does require an appraisal and inspection before your loan can be approved. The FHA inspection has clear guidelines on what needs to be repaired before your loan can close. They want to make sure home buyers are moving into a home that is safe and operational. The exception is the streamline refinance which the only FHA loan program that does not require an appraisal.

Can I get an FHA loan for an investment property?
FHA loans are for primary residences only and if your goal is to purchase an investment property, you cannot use FHA insured financing for that purchase. However, if you are currently living in a home that is financed with an FHA loan, you can move to a new home and keep the current home as an investment.

How do I apply for an FHA loan in the state of Alabama?
To apply for an FHA loan, you need to complete the residential loan application in full. Begin by completing this short loan scenario form. A loan officer will reach out and will hold your hand through the entire application process.

Are there any income limits in Alabama for FHA financing?
FHA loans do not have income limits the way USDA loans do. You can be a high income earner and still qualify for an FHA loan.

What is the minimum credit score required for an FHA loan?
The minimum credit score allowed for an FHA loan is 500 but with a 10% down payment.

Can I use an FHA loan to purchase a second home?
FHA loans are only available for the purchase or refinance of a primary residence

Can I refinance my existing mortgage with an FHA loan in Alabama?
You can refinance into an FHA loan even if your existing mortgage is not an FHA loan.

What are the current interest rates for FHA loans in Alabama?
At the moment, the interest rate for an FHA loan is slightly lower than conventional loans assuming the borrower has good credit.

Facts about FHA Loans

1. FHA loans are a type of government backed mortgage loan insured by the Federal Housing Administration.
2. Alabama residents can utilize FHA loans to purchase a home with a low down payment requirement.
3. These loans have flexible credit requirements, making them accessible to a wide range of borrowers.
4. The maximum loan amount for an FHA loan in Alabama is determined based on the county in which the property is located.
5. In Alabama, FHA loans offer competitive interest rates, making homeownership more affordable for many individuals and families.

FHA Loan Statistics in Alabama

1. Over 60% of homebuyers in Alabama utilize FHA loans for their mortgage financing.
2. The average down payment for an FHA loan in Alabama is 3.5% of the purchase price.
3. Alabama residents have accessed over $1 billion in FHA loans in the past year.
4. Approximately 8 out of every 10 first-time homebuyers in Alabama choose an FHA loan as their financing option.
5. The approval rate for Alabama FHA loan applications is over 90%, making it a popular and accessible choice for many borrowers in the state.

Alabama Housing and Living Statistics

Population 4.9 Million
Median Age 39.3
Median Household Income $49,861
Median Property Value $147,900
Number of Employees 2 Million
Average Commute Time 24.3 minutes


Consumer Credit License #22737 dba UMC Mortgage Company, Inc.

Alabama FHA Loans