Overview of Alabama Mortgages
In a state lineup, Alabama ranks nearly dead center in terms of population size. This southern state’s mortgage market follows suit, coming in right around average compared to historical national rates. For the most part, Alabama counties’ conforming loan limits and FHA loan limits also hover around average.
|30 year fixed||3.00%||3.00%||0.00|
|15 year fixed||2.50%||2.50%||0.00|
|30 yr fixed mtg refi||3.15%||3.15%||0.00|
|15 yr fixed mtg refi||2.71%||2.71%||0.00|
|7/1 ARM refi||3.63%||3.63%||0.00|
|15 yr jumbo fixed mtg refi||3.29%||3.10%||+0.19|
National Mortgage Rates
Historical Mortgage Rates in Alabama
Alabama Mortgage Rates Quick Facts
- Median Home Value: $154,000 (U.S. Census Bureau)
- Loan Funding Rate: 51.76% (CFPB)
- Homeownership Rate: 70.7% (St. Louis Fed)
- Median Monthly Homeownership Costs: $1,186 (U.S. Census Bureau)
Alabama mortgage rates generally align closely with the national average. Homeownership costs in the state are also lower than the national median, which is $1,595.
A financial advisor in Alabama can help you plan for the homebuying process. Financial advisors can also help with investing and financial plans, including tax, retirement and estate planning, to make sure you are preparing for the future.
Alabama Historic Mortgage Rates*
|Year||Alabama Rate||U.S. Rate|
*The FHFA stopped reporting new data in 2018.
Alabama Mortgages Overview
Alabama is one of the more affordable states to purchase a home. The median home value here is $154,000, well under the corresponding national figure of $240,500.
Every county in the state has a standard conforming loan limit of $548,250. The data once again puts Alabama at an average, affordable level compared to the rest of the country. Every county also has the standard FHA limit of $356,362.
Conforming and FHA Loan Limits by County
|County||Conforming Limit||FHA Limit|
It’s important to note that Alabama is a “caveat emptor," which is also known as a “buyer beware” state. That means responsibility falls heavily on the buyer to uncover any defects with the property prior to purchasing. Property inspections are an incredibly valuable tool to verify a property’s conditions before purchase. Home inspections are not mandatory, but they are absolutely critical to the integrity of a purchase. Following through on a sale without an inspection generally means a buyer is accepting the property as-is.
30-Year Fixed Mortgage Rates in Alabama
Fixed-rate mortgages tend to be the best mortgage option for buyers who plan to stay in their home for the long haul. As a result, 30-year fixed-rate mortgages are the most common type of home loan. Rates are reasonable and you’re guaranteed the same principal and interest payment over the life of the loan. Another option is a 15-year fixed-rate mortgage, a loan that generally comes with lower interest rates than the 30-year alternative. However, your monthly payments will be higher with this option.
The average 30-year fixed mortgage rate in Alabama is 2.70% (Zillow, Jan. 2021).
Alabama Jumbo Loan Rates
Homes in Alabama tend to be on the more affordable end. Because of that, there are fewer jumbo loan mortgages in Alabama. These type of loans exceed the $548,250 conforming loan limit that exists in every Alabama county. If you’re considering a jumbo loan for your mortgage, be aware that they come with higher interest rates.
Conforming loan limits exist because issuing a loan beyond that price is riskier for lenders. There is more money at stake, so the higher mortgage interest rate on jumbo loans is meant to compensate for the added risk.
The average rate for a 30-year fixed jumbo mortgage in Alabama is 2.65% (Zillow, Jan. 2021).
Alabama ARM Loan Rates
An ARM is an adjustable-rate mortgage that typically offers a lower interest rate upfront than a fixed-rate mortgage. The lower rate is available for an initial, introductory period that may last for 1, 3, 5, 7 or 10 years, depending on the terms of the loan. After that initial period, the mortgage interest rate can “adjust” once a year. Generally, the rate increases.
The good news is that there’s an interest rate cap specified in the loan’s terms, which protects you from that scenario. So you will know upfront what the highest possible rate could be.
However, the loan rate may still adjust to a level that you can’t afford. Before deciding on an ARM, it’s best to assess the potential maximum interest rate listed in the terms to see if it’s something you would be comfortable paying.
The average rate for an 5/1 ARM in Alabama is 3.01% (Zillow, Jan. 2021).
Alabama Mortgage Resources
If you need help with your Alabama mortgage, there are resources available for you. The Alabama Housing Finance Agency (AHFA) offers two programs to help you get started. The Step Up program was designed to help mid-range homebuyers who can afford a mortgage, but need more assistance with their down payment. The funds for the down payment are secured with a second mortgage and combined with a standard 30-year fixed-rate mortgage.
The AHFA also offers a Mortgage Credit Certificate, which reduces homebuyers’ federal income tax to free up income for a mortgage qualification.
If you’re struggling with your mortgage and are concerned you might go into foreclosure, the Hardest Hit Alabama program can help. Eligible homeowners can receive unemployed or underemployed mortgage help, loan modification and lien extinguishment.
|Resource||Problem or Issue||Who Qualifies|
|Alabama Housing Finance Authority||Offers down payment assistance, affordable loans and a mortgage credit certificate.||First or repeat homebuyers who are eligible.|
|Hardest Hit Alabama||Foreclosure protection.||At-risk homeowners who need help keeping their homes.|
|USDA Rural Development - Single family loans||Offers low-interest loans to buy, build, repair, or own safe and affordable homes in rural America.||Applicants must be without decent, safe and sanitary housing; Be unable to obtain a loan from other resources on terms and conditions that can reasonably be expected to meet; Agree to occupy the property as your primary residence; Have the legal capacity to incur a loan obligation; Meet citizenship or eligible noncitizen requirements; Not be suspended or debarred from participation in federal programs.|
In Alabama, you may also qualify for assistance from the United States Department of Agriculture Rural Development. The program is intended to help rural communities by offering aid in securing safe, affordable housing. Loans and grants are available for people looking to purchase a new home or repair their current home.
Alabama Mortgage Taxes
Homeowners are allowed to deduct the mortgage interest they pay when they file their federal income taxes. This applies for Alabama state income taxes as well. You can double your deductions for the qualifying mortgage interest payments you have made in the tax year by including it on both state and federal filings.
Alabama also charges taxes on real estate property title transfers. The state real estate transfer tax for Alabama is $0.50 per $500 of transferred value. In Alabama, the buyer typically pays this tax. You’ll want to discuss this tax with your lawyer or accountant before buying.
Alabama Mortgage Refinance
While the Home Affordable Refinance Program (HARP) no longer exists, there is an alternative: the High Loan-to-Value Refinance Option from Fannie Mae.
Best Places To Get A Mortgage
SmartAsset’s interactive map highlights the best counties in the U.S. (and in each state) for securing a home mortgage. Hover over states and counties to see rankings and data points for each region, or use the map’s tabs to view the top counties for each of the factors included in our analysis.
Methodology In order to determine the best places in the country to get a mortgage, our study compared four factors, including overall borrowing costs, likelihood of securing a mortgage, property taxes and annual mortgage payments.
To calculate the overall borrowing costs, we analyzed the expected costs throughout the first five years for a $200,000 mortgage with a 20% down payment, including closing costs. We calculated the ease of getting a mortgage as the ratio of mortgage applications to mortgage originations (secured mortgages) in each county. Annual mortgage payments are a measure of the annual principal and interest payments for a $200,000 loan in that location using average mortgage rates in each county.
Finally, we ranked locations based on these four factors, giving equal weight to each factor. The areas with the lowest average rankings are the best places to get a mortgage.
Sources: Mortgage Bankers Association, US Census Bureau 2018 5-Year American Community Survey, Informa, Bankrate, government websites, SmartAsset