Palms Realty
FIRST-TIME BUYERS

Buying your first home in the Birmingham area

The help that is available in Alabama, the costs that surprise people at closing, and the one form to file after you move in.

Where the market stands

The median Birmingham-area home sold for $329,950 in August 2026, up 6.4% from a year earlier. Homes went under contract in 37 days on average, and there were 3.8 months of supply, down from 4.4. Under six months generally favors sellers, so be ready to move when the right house shows up. See the full numbers in our Birmingham market report.

Down payment help from AHFA

The Alabama Housing Finance Authority's Step Up program lends part of your down payment as a second mortgage. Per AHFA:

  • Assistance of 4% of the sales price, up to $10,000, as a 10-year second mortgage at the same rate as the first.
  • Qualifying income of $172,800 or less, regardless of household size or location.
  • Credit score of 640 or higher and a debt-to-income ratio of 45% or lower.
  • FHA, VA, USDA or HFA Advantage conventional loans only, through a participating lender.
  • You must complete a homeownership education course and move in as your primary residence within 60 days of closing.

AHFA also offers a Mortgage Credit Certificate, a federal tax credit of up to 50% of the mortgage interest you pay each year, capped at $2,000, for eligible first-time buyers, with income and price limits.

Two taxes you pay to record the purchase

Alabama charges a mortgage tax of $0.15 per $100 of the loan and a deed tax of $0.50 per $500 of value. The deed tax applies only to the value above a mortgage on which the mortgage tax was paid. On a $329,950 home with a $264,000 loan, that works out to about $396 of mortgage tax and $66 of deed tax, plus recording fees. In Jefferson County, recording is $16 for the first page and $3 for each additional page. Who pays which item is set by your purchase contract. See Alabama closing costs for more.

File for the homestead exemption

Owner-occupied homes in Alabama are assessed at 10% of market value. Once you own and live in the home, claim the homestead exemption with the county. In Jefferson County, bring your deed or proof of ownership to any tax assessor location; the owner who lives there signs. The State credits the first $4,000 of assessed value and Jefferson County the first $2,000, and Birmingham and Homewood also allow a credit. Claims must be made by December 31 for the next tax year.

How we help

Before you write an offer, we look at the house the way an appraiser does: the recent sales that matter, what the price assumes, and what could come up at appraisal. Run the payment first with our mortgage calculator, or get listings by email.

Sources

This page is general information, not legal or tax advice. Program terms, fees and rules change; confirm current terms with the source linked above, your lender and your attorney. Updated October 30, 2026.

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