How to Buy a House in Alabama: A Homebuyer’s Guide
Updated: March 31, 2023
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The average value of a home in Alabama is roughly $211K — it has increased by about 16.7% in the past year. Alabama rates are much cheaper than a typical home in the U.S., which has an average value of $365K.
Additionally, Alabama residents spend an average of $1,060 for their monthly mortgage, making it the 16th-cheapest state to purchase a home. While cost is a significant factor in homebuying, you should also consider other variables, such as lender terms.
Understanding the homebuying process can help you efficiently process your application, close a deal and avoid falling into deep debt. In this guide, MoneyGeek highlights the most important basics for Alabama homebuyers.
Choose an Ideal Location
When purchasing a home, one of the main factors homebuyers usually consider is location. Where you choose to live has a huge impact on the cost of your home and mortgage.
Additionally, you may want to assess your priorities and lifestyle. The location usually indicates the neighborhood culture, cost of living, access to certain amenities and available recreational activities.
Calculate Mortgage Rates
The cost of your mortgage heavily relies on several factors, including the lender, your credit score, income, interest rates, loan type, terms, size and more. It’s advisable to balance these factors so you can choose the best mortgage rate for you.
Prepare Down Payment Requirements
You typically need to provide a down payment before you can purchase a home. Your rate depends on your loan type since some loans require little to no down payment.
Get Pre-Approved for a Mortgage
Once you’ve chosen a lender, the next step is to get pre-approved for a mortgage. This step is crucial. Pre-approval allows you to consult the lender about their terms and your budget.
Keep in mind that a pre-approval isn’t the same as a prequalification. When you prequalify, your lender simply provides a loan amount estimate. Meanwhile, a pre-approval typically entails a hard credit check, whereas a prequalification does not.
Conduct a Home Inspection
Performing a home inspection is vital to the purchasing process. Home inspections conducted by a third-party professional tell you more about the home’s current condition and if repairs are necessary. The homebuyer usually shoulders the cost of a home inspection.
Close Your Mortgage Loan
After you’ve thoroughly reviewed the loan terms, you can proceed to closing your mortgage loan. Keep in mind that there are closing costs when you’re purchasing a home. Closing costs are how much you pay the lender for your credit report, appraisal charges and document preparation fee. You may also need to pay third parties for a home appraisal, legal work, pest inspection and more.
Alabama Homebuying Details
Alabama homebuyers should remember to research their new home’s location, explore different mortgage types and shop around for a lender that fits their needs. Although these are general steps to follow throughout a homebuying journey, there may be processes unique to Alabama. Feel free to contact your lender or a real estate professional so you can prepare for Alabama’s homebuying steps.
Additionally, Alabama residents can seek homeowner assistance programs to help them buy the home of their dreams.
First-time Alabama homebuyers earning a moderate income who can afford a mortgage but need help with their down payment may be eligible for assistance through the Step Up homeownership program.
Homeowners can also combine Step Up with an Affordable Income Subsidy Grant to help with their closing costs. Both assistance programs have specific eligibility requirements for Alabama homebuyers and require the completion of a homeowner education course.
Frequently Asked Questions About Buying a Home in Alabama
Buying a home in Alabama is a big step. To guide you through the process, MoneyGeek answered the most commonly asked questions homebuyers need to know. Browse the frequently asked questions below to kickstart your homebuyer journey.
Buying a home is an important step in anyone’s life. Therefore, it’s important to ask yourself a few questions before you begin. Figure out where exactly you want to live, list your priorities for that location and compute your budget.
Homeownership is a huge commitment that entails financial responsibilities. Thus, it might not be for everyone. Purchasing a home in Alabama is generally a good idea when you’re emotionally and financially ready.
In the last year, the value of an average home in Alabama has increased by 16.7%. Its approximate value is now $211K. Purchasing a home in this state can be a wise decision if you’re financially capable. You can determine whether you’re ready by analyzing the credit standing and debt-to-income ratio requirements of mortgage lenders.
The average monthly household income in Alabama is $5,604. You may need more or less income depending on where exactly you choose to live, but this figure provides a good baseline for what lenders will expect.
In Alabama, the average annual property tax is $895, with a typical real estate tax rate of 0.41%.
The cheapest metro areas in Alabama are Gadsden, Florence-Muscle Shoals and Decatur.
sources
- Alabama Center for Real Estate. "How Affordable Is Housing in Alabama?." Accessed September 28, 2022.
- Alabama Housing Finance Authority. "What Is an Affordable Income Subsidy Grant?." Accessed September 28, 2022.
- Alabama Housing Finance Authority. "Step Up." Accessed September 28, 2022.
- Alabama Housing Finance Authority. "Tips for Buying Your First Home." Accessed September 28, 2022.
- Consumer Financial Protection Bureau. "Get a Prequalification or Preapproval Letter." Accessed September 28, 2022.
- Consumer Financial Protection Bureau. "What Is Mortgage Insurance and How Does It Work?." Accessed September 28, 2022.
- International Association of Certified Home Inspectors. "Home Inspection Standards of Practice." Accessed September 28, 2022.
- U.S. Department of Agriculture. "Single Family Housing Direct Home Loans | Rural Development." Accessed September 28, 2022.
- Zillow. "Alabama Home Values." Accessed October 6, 2022.