Mortgage Rates Alabama

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    Mortgage Rates Alabama: Finding The Best-Rated Loan

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    If you’re looking for affordable homes, the State of Alabama can be one of the best choices – the median home price is well under national numbers. However, with Alabama mortgage rate trends rising in recent years, it’s best to act quickly. 

    We’re here to help you find your dream home in Alabama. In this guide, we’ll give you insider access to mortgage rates in Alabama and share home buying tips!

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    Mortgage Options In Alabama 

    There are three major mortgage types commonly available to American borrowers. Let’s break down each of them:

    Conventional Loans

    The most common loan option for homebuyers, conventional loans are available through banks, mortgage companies, and other private lenders. These loans have limits set by the Federal Housing Finance Agency (FHFA), with current limits up to $548,250 in the State of Alabama.

    Fixed-Rate Mortgage

    Fixed-rate mortgages are the most common type of conventional mortgage. They come with constant mortgage interest rates throughout the life of the loan. Because monthly payment amounts on this loan are fixed and easy to predict, they’re very popular with new homebuyers and long-term financial planners.

    Fixed-rate mortgages come in a variety of terms. While 30-year fixed-rate mortgages are the most common, lenders also often offer 15-year and 20-year terms. 

    Adjustable-Rate Mortgage (ARM)

    Adjustable-rate mortgages feature a variable mortgage interest rate & APR. ARMs have a period of fixed mortgage rates for the first few years before the loan enters its annual rate adjustment phase. 

    The ARM rate & APR during the fixed-rate period is usually lower, making them a popular choice with those looking for short-term savings. An ARM’s fixed-rate period varies and is usually denoted by its name – for instance, 7/1 ARM comes with 7 years of fixed APR & mortgage rates before the adjustable-rate phase starts. 

    Government-Backed Home Loan

    The federal government, through specific agencies, insures loans aimed at certain target demographics. These loans give borrowers better rates as well as relaxed qualification requirements.

    The three most prominent government loans are:

    • FHA loans: These loans are insured by the Federal Housing Administration and aimed at lower-income borrowers. An FHA loan is easier to qualify for due to its low credit rating requirements, but you must pay for private mortgage insurance (PMI) until the loan ends.
    • USDA loans: This loan can only be used to buy homes in certain rural areas. However, USDA loans have no down payment requirement and lower PMI fees compared to an FHA loan. 
    • VA loans: A VA loan is restricted to military members and their families. Borrower requirements are relaxed, with no credit score and zero down payment minimums.

    Mortgage Refinancing

    If you have an existing mortgage, refinancing can help you:

    • Change your loan terms: With a rate and term refinance, you can adjust an existing mortgage’s length. You can also change your loan type from a fixed-rate loan to an adjustable-rate one or vice versa. 
    • Leverage home equity: Taking a cash-out refinance allows you to convert home equity into cash. You do this by taking out a loan larger than your current mortgage – any money left over after paying your mortgage balance can be used for other purposes.

    Current Alabama Mortgage Rates 

    Knowing mortgage and refinance rates in the state is essential when buying a home. Here’s inside access to the most current Alabama mortgage rates:

    The interest rate & APR data on this table are gathered from a survey of the nation’s major lenders. We update this daily!

    Today’s Mortgage Rates In Alabama

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    We also have a mortgage rate & APR estimate tool at the top of this page. All you need to do is enter your basic details, and we’ll calculate a personalized Alabama mortgage rate & APR estimate just for you!

    Keep in mind that the interest, APR, and refinance rates listed on this table may be subject to change without prior notice.

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    First-Time Homebuyer Programs In Alabama 

    As with other states in the US, Alabama has a host of first-time homebuyer programs. Administered by the Alabama Housing Finance Authority (AHFA), the state offers three loan programs:

    AHFA Step Up 

    The Step Up program provides eligible homebuyers in Alabama with a 30-year HFA Advantage conventional mortgage or an FHA loan. These loans come with competitive mortgage rates as well as down payment assistance.

    To qualify for a Step Up loan, you must fulfill several requirements:

    • Purchased property must be in the State of Alabama
    • Borrower’s income must not exceed $130,600
    • Borrower must have a credit score of 640 or higher
    • Borrower must have a debt-to-income ratio of 45% or lower
    • Borrower must complete a mandatory homeownership course

    AHFA Affordable Income Subsidy Grant

    If you qualify for an HFA Advantage loan, the AHFA also offers the Affordable Income Subsidy Grant. If you qualify, you’ll receive up to 1% of your mortgage to pay closing costs and lender fees.

    Mortgage Credit Certificate

    The state also offers first-time homebuyers a mortgage credit certificate (MCC). If you meet income and purchase price limits for the MCC, you’ll receive a tax break from the state of up to $2,000 each year.

    Buying A Home In Alabama

    Now that you know your options, it’s time to take action! In this section, we explain the five simple steps to buying a home in the State of Alabama.

    Check Your Budget

    First of all, you need to know your budget. A good rule of thumb is to keep your housing cost at 25% of your monthly income. Once you’ve worked out how much you can afford to spend on mortgage payments, you’ll have a loan amount in mind. 

    You also need to prepare for the other expenses of home buying: closing cost, lender fees, and property taxes, among others.

    Choose The Right Lender And Loan

    Finding the right lender is essential to getting the best-valued loan. Make sure to compare rates and terms between multiple companies. You should also consult loan officers and other mortgage resources to find out which loan suits your needs best.

    Get Pre-approved

    Once you’ve settled on a loan amount and type, it’s time to get pre-approved! During pre-approval, the lender will check your financial details and confirm how much they’re willing to lend. Having a preapproval letter also shows sellers that you’re serious and financially capable of buying the house.

    Start Hunting For Homes

    With the help of a local real estate agent, start your house hunt by researching neighborhood listings. Ask your realtor about the details of the neighborhood you’re interested in – average property values and commute times in the area are essential.

    Once you’ve locked onto a neighborhood, you can narrow down your search to local listings. A good piece of advice is to buy the most affordable house in that neighborhood that meets your requirements. If you have money left over from the purchase, you can use it for home improvements. 

    Make The Offer

    You’re unlikely to be the only prospective buyer of any given home. When you make an offer to the seller, be sure to add things that may sweeten the deal for them and ensure your offer stands out. Consider putting down a larger deposit or making a bid above the home value. 

    Your home buying journey doesn’t end when the seller agrees to your offer. Always remember to do your due diligence – do not finalize the sale until you’ve had the home inspected and appraised. 

    Once that’s all covered, sign the closing paperwork and finalize your purchase!

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    How To Get Better Interest Rates 

    Since mortgages are a long-term commitment often spanning several years (if not decades), lower rates can help lighten the financial strain. To help drive your interest rate & APR down, here are our three top tips!

    Buy Discount Points

    Discount points lower your interest rates in exchange for an upfront payment. These points are worth 1% of the loan amount and lower your interest rates by 0.25%. For example, two points on a $200,000 loan with a 4.25% interest would cost $4,000 and reduce the rate to 3.75%. 

    Discount points don't have to be whole numbers – you can pay 1.5 points or even 0.5 points, depending on how much you’re willing to spend. But before paying for points, ensure that the upfront cost is worth the long-term rate & APR savings.

    Improve Your Borrower Profile

    Lenders determine your rates based on the risk they take lending you money – a riskier borrower will have a higher rate & APR. To help convince the lender that you’re a dependable borrower and reduce your rate & APR, here’s some advice to improve your credit score:

    • Check your credit scores regularly and report any inconsistencies.
    • Pay down the balance on your credit cards.
    • Pay your bills on time.

    Increase Your Down Payment

    Most mortgages require you to pay 20% down, while some allow you to pay lower than 20% but require you to pay PMI fees. While low downs are easier to save up for, paying over 20% down payment can reduce your rate & APR by:

    • Reducing the loan balance
    • Reducing the risk that the lender takes on

    However, before you increase your down payment, consider your finances. You still have to pay for lender fees, closing costs, and other upfront charges on your loan, so you shouldn’t spend all your money on the down.

    Closing Thoughts

    Getting the right mortgage is the key to getting your dream Alabama home. To reduce your rates and save up on your home purchase, just follow this guide. But if you are still confused or need professional help, don’t hesitate to reach out.

    Wesley LLC is here to help you find the best Alabama mortgage that suits your needs. Contact us today for more information!

    Written By Ed Wallace
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