How AHFA works
AHFA doesn't lend money directly. You apply through a participating lender, and AHFA keeps a list of them on its website. You're free to use any lender you want, and I can share several local names if you'd rather not start from scratch.
A few rules run across the programs. AHFA's published minimums include a 640 credit score and a debt to income ratio of 45% or lower. At least one borrower has to finish an AHFA approved homebuyer education course before closing: face to face counseling, an approved online course, or the National Foundation for Credit Counseling's Keys to Homeownership book. The certificate has to be dated within a year. And the home has to be the one you live in, not a rental or a business.
Sources: AHFA, how do I apply; AHFA, Step Up; AHFA lender notice, April 8, 2026 (education). Checked October 16, 2026.
The three programs
Step Up
- What it is: A 30 year fixed rate first mortgage, plus down payment help secured by a 10 year second mortgage. ServiSolutions, a division of AHFA, services both loans together.
- The help: 4% of the sales price, up to $10,000.
- Income limit: $172,800 household income or less, for any household size, anywhere in Alabama.
- Works with: FHA, VA, USDA, or HFA Advantage conventional.
- Worth knowing: AHFA's Step Up page lists no first time buyer requirement. It gives the 10 year term for the second mortgage but not the repayment details, so ask your lender how it's repaid.
First Step
- What it is: A 30 year fixed rate first mortgage at a below market rate, plus down payment help secured by a 10 year second mortgage.
- The help: Up to $10,000 or 4% of the sales price, whichever is lower. AHFA's FAQ says the second mortgage carries the same rate as the first, is repaid monthly, and is not forgivable.
- Income limit: Set by area and household size (table below). Sales price limits apply too.
- Works with: FHA, VA, USDA, or Freddie Mac HFA Advantage conventional.
- Worth knowing: Outside AHFA's target areas, you can't have owned your primary home in the last three years. Some veterans are exempt from that rule. A federal recapture tax can apply if you sell within the first nine years.
Affordable Income Subsidy Grant
- What it is: A grant toward closing costs, offered on top of the First Step or Step Up down payment help.
- The help: 1% of the loan amount if household income is at or below 50% of the area median, or 0.5% if it falls between 50.01% and 80%.
- Income limit: At or below 80% of the area median income for the home's county, using Freddie Mac's limits.
- Works with: HFA Advantage conventional only.
- Worth knowing: Because it only works with the conventional HFA Advantage loan, it doesn't pair with FHA, VA or USDA.
Sources: AHFA program pages for Step Up, First Step and the Affordable Income Subsidy Grant; AHFA First Step FAQ. Checked October 16, 2026.
First Step limits for the Shoals
First Step limits depend on the county, your household size, and whether the address is in one of AHFA's target areas. AHFA has a target area map where your lender can check a specific address. These are the limits for applications taken on or after June 24, 2026.
| Area | 1 to 2 people | 3 or more |
|---|---|---|
| Lauderdale and Colbert, target area | $115,080 | $134,260 |
| Lauderdale and Colbert, other areas | $95,900 | $110,285 |
| Counties AHFA doesn't name, like Franklin, target area | $107,400 | $125,300 |
| Counties AHFA doesn't name, like Franklin, other areas | $89,500 | $102,925 |
The sales price limit is the same statewide: $692,211 in target areas and $566,355 everywhere else.
These are AHFA's published program limits, not a promise of approval. A participating lender looks at the whole picture and confirms which limits apply to you and the address.
Sources: AHFA, First Step income limits and sales price limits, both effective June 24, 2026. Franklin County isn't named in AHFA's table, so it falls under the row for all other counties; confirm with your lender. Checked October 16, 2026.
What ended
Older websites still mention AHFA's Mortgage Credit Certificate, a federal tax credit on mortgage interest. AHFA sunset it in 2025 and stopped taking new reservations after October 31, 2025. AHFA said it hopes to bring it back if bond capacity opens up, but no relaunch had been announced as of October 16, 2026.
Source: AHFA lender notice, September 22, 2025. Checked October 16, 2026.
How I'd use this
Talk to a participating lender before you start touring, and ask them straight out which AHFA program fits, if any. Down payment help changes how much cash you need at closing, so it's worth knowing before you fall for a house. Then bring me the number and we'll shop inside it.
If AHFA isn't a fit, it's not the only road. FHA loans can go as low as 3.5% down, and VA and USDA loans often need no down payment at all. My first time buyer guide covers all of it, step by step.
Common questions
Is Step Up only for first time buyers?
AHFA's Step Up page lists no first time buyer requirement. First Step is different: outside AHFA's target areas, you can't have owned your primary home in the last three years, though some veterans are exempt.
Is AHFA down payment help a grant?
Step Up and First Step help comes as a 10 year second mortgage, not a gift. For First Step, AHFA says the second mortgage is repaid monthly at the same rate as the first and is not forgivable. The Affordable Income Subsidy Grant is the grant, and it goes toward closing costs.
Can I use AHFA help with a USDA or VA loan?
Yes for Step Up and First Step, which both work with FHA, VA, USDA and HFA Advantage conventional loans. The closing cost grant works only with HFA Advantage conventional.
Do I have to take a homebuyer class?
Yes. At least one borrower has to finish an AHFA approved homebuyer education course before closing. AHFA accepts face to face counseling, an approved online course, or the National Foundation for Credit Counseling's Keys to Homeownership book, with a certificate dated within a year.
Where do I apply?
AHFA doesn't lend directly. You apply through a participating lender, and AHFA lists them on its website. You're free to use any lender you want, and I can share several local names.
Is the Mortgage Credit Certificate still available?
No. AHFA stopped taking new Mortgage Credit Certificate reservations after October 31, 2025. AHFA has said it hopes to bring the program back, but no relaunch had been announced as of October 16, 2026.
General information about AHFA's published programs, not financial or legal advice. Program terms, limits and funding change, and AHFA updates its limits each year. A participating lender confirms what's current. Updated October 16, 2026.