Alabama offers Gulf Coast beaches and the 2nd-lowest property tax. Plus, with over 18K homes for sale in Alabama, you have plenty of options. But buying a house in Alabama can be challenging. You must get pre-approved, check neighborhoods, and attend open houses.
With Houzeo, Alabama’s best home buying website, managing your home search is simple. You can look through the latest listings in the Cotton State, save your favorites, schedule showings, and submit offers, all at your fingertips.
👉 Download the Houzeo mobile app to simplify your Alabama home search.
TL;DR: How to Buy a House in Alabama
To buy a house in Alabama, get mortgage pre-approval, hire a real estate agent, and make an offer. Complete the inspection, appraisal, and financing. Then cover a down payment (typically 3–20%) plus 2–5% in closing costs and sign documents to transfer ownership smoothly.
7 Steps for Buying a Home in Alabama 🚀
Step 1: Decide Your Homebuying Purpose
Whether you’re looking for a getaway or seeking an investment, knowing why you’re buying real estate in Alabama is essential. It sets your expectations and helps you make smarter choices. Here’s what you should keep in mind:
- Primary Residence vs. Investment: If you want to buy a home, choose places that fit your lifestyle, whether it’s a city like Huntsville or a suburb like Madison. For investment, consider homes for sale in Auburn, where Auburn University drives demand for rental properties.
- Short-Term or Long-Term: If you plan to live in the house for only a few years, focus on neighborhoods with strong resale value and upward market trends. You can check out homes for sale in Huntsville or Montgomery, where the housing market continues to grow.
- Space Requirements: If you’re looking for larger lots or big backyards, consider suburban areas like Alabaster. But if you prefer something easier to manage, condos in places like downtown Twickenham Square can be a smart option.
Calculate the cost of living in Alabama to get a detailed breakdown of expenses like housing, utilities, transportation, and more. 🏡
Step 2: Explore Financing Options
Before making a purchase, it’s important to understand the financing options available to you to make an informed decision. Here’s what you need to do:
1. Prepare Financially
- Check Your Credit Score: Lenders will check your credit score to determine if you’re eligible for a loan. Aim for a score of 500+ for an FHA loan and 620+ for a conventional loan.
- Calculate Your Debt-to-Income (DTI) Ratio: Lenders often use your DTI ratio to assess how much debt you can afford. Keep your DTI below 36%, especially if you want a home in an expensive region like Mountain Brook or Vestavia Hills.
- Set Your Budget: Ensure your budget includes Alabama property taxes, homeowners’ insurance, and potential flood insurance, particularly in Alabama’s coastal areas like Mobile or Fairhope.
👉 Use an Alabama mortgage calculator to estimate how much property you can afford in the Cotton State.
2. Explore Loans and Assistance Programs
Down payments in Alabama range between 10% and 20%, but often vary based on the financing option you choose. You can also look for suitable Down Payment Assistance Programs (DPAs) to help you cover part or all of your down payment.
| Program | Description |
| FHA Loans | Require just 3.5% down and are ideal if you’re a first time home buyer in Alabama. |
| VA & USDA Loans | Offer 0% down with lower interest rates. Perfect for veterans or those purchasing homes in rural areas. |
| Step Up Program | A down payment and closing cost assistance program that offers a 30-year fixed-rate primary mortgage plus a 10-year second mortgage, covering up to 4% of the sales price or $10,000, whichever is less. |
| First Step Program | The program offers a 10-year second mortgage for moderate-income homebuyers to cover the down payment and closing costs. |
| Mortgage Credit Certificate (MCC) | A federal tax credit for first-time home buyers to reduce their federal income tax liability. You can claim up to 20%-40% of the mortgage interest paid each year |
Step 3: Get Pre-Approved for a Mortgage
The Alabama housing market is competitive, so get a mortgage pre-approval to show sellers you’re a serious buyer. In fact, 86% of sellers prefer buyers who are pre-approved. It also helps you negotiate better and reduces delays in the transaction.
Shop around to find the best Alabama mortgage lenders—compare their programs, rates, and terms. Once you’ve narrowed down your options, get pre-approved by submitting documents like proof of income, credit history, bank statements, and your ID proof.
Step 4: Dive Into the Alabama Market
Whether you’re looking at houses for sale in Montgomery or anywhere else in the Cotton State, here’s how to buy smart:
- Online Listings: If you’re wondering how to buy a house, starting with online listings is a good first step. Use platforms like Houzeo to search homes for sale by price, zip code, and more. You can also filter for must-haves like a backyard, waterfront view, etc.
- FSBO (For Sale By Owner) Homes: Explore FSBO listings, as they often offer more flexibility in price negotiations. This is because sellers aren’t paying 5% to 6% in agent fees.
Gadsden is the nicest and cheapest place to live in Alabama. The number of homes for sale in Gadsden is on the rise, thanks to its safe neighborhoods and diverse job opportunities.
Step 5: Make a Competitive Offer
In Alabama’s competitive housing market, homes tend to sell fast. Make sure you focus on real estate comps for a more accurate picture. Here’s a checklist to help you craft a strong offer:
- Seller’s Name and Address: Don’t forget the basics—include the seller’s legal name and property address.
- Price and Terms: Offer a price based on Fair Market Value (FMV) and comparable sales. In high-demand areas like Huntsville, you might need to offer above the asking price to stand out.
- Down Payment: In Alabama, down payments usually range from 3% to 20%. In competitive markets like Madison, a larger down payment can strengthen your offer.
- Earnest Money: Boost your earnest money deposit to show you’re serious, especially in hotspots like Birmingham or Mobile, where homes can go fast.
- Contingencies: Include protections like home inspection, financing, appraisal, and insurance contingencies. In coastal Alabama, consider flood and windstorm insurance checks.
- Concessions: Request the seller to cover some closing costs. In Alabama, it’s common to negotiate repairs after the inspection, such as roof damage, HVAC problems, or plumbing leaks.
- Deadline for Seller’s Response: Set a 24- to 72-hour deadline to encourage a prompt reply. This helps prevent delays and keeps you on track for Alabama’s average 30 to 45-day closing timeline.
- Closing Costs in Alabama: Expect closing costs around 2% to 5% of the home’s price, including title insurance, property taxes, and lender fees.
Step 6: Conduct Inspections and Appraisals
A standard home inspection in Alabama should cover:
- HVAC System: Ensure the air conditioning can handle Alabama’s heat and humidity. It is essential for year-round comfort.
- Plumbing: Check for leaks, corrosion, and water pressure issues, especially in Alabama homes built before the 1980s. These houses are more vulnerable to damage.
- Electrical System: Verify everything is up to code and can withstand storm-related power surges, which are common in Alabama.
- Roof Condition: Assess for storm damage, missing shingles, or age-related wear. It’s important in this hurricane and tornado-prone state.
- Foundation and Structure: Look for cracks, moisture, or settlement issues, particularly in flood-prone or sandy-soil areas.
If you’re browsing homes for sale in Gulf Shores or elsewhere, ensure that you get a wind mitigation inspection for hurricane risk. Also, if you have a condo over 30 years old and higher than two stories, make sure you get a Milestone Inspection for structural safety.
Once the inspection is complete, your lender will order a home appraisal to confirm the property’s market value. This step ensures the loan amount aligns with what the home is actually worth. It can impact final loan approval, especially if the appraisal comes in low.
Step 7: Close on Your Alabama Home
Almost there! Closing usually takes 30–45 days, from signing the contract to getting the keys in your hand. Here’s what you can expect:
- Final Walkthrough: Make sure all repairs have been completed, and the home is in the agreed-upon condition.
- Buyer Closing Costs: Expect to pay 2%–5% of the home price. This includes title fees and lender charges, plus prepaid taxes or insurance.
Once you sign the dotted line and transfer escrow funds—congratulations, you’re officially a homeowner. Grab those keys and cue your happy dance! 🎉
What Should You Do After Closing?
Welcome home! Now it’s time to handle a few must-dos to protect your investment:
- File for Homestead Exemption: If the home is your primary residence, apply for Alabama’s Homestead Exemption to reduce your property taxes. You could get up to a $12,000 reduction in taxable value—especially valuable in high-tax areas like Mountain Brook.
- Set Up Utilities: Get water, electricity, internet, and trash service connected, often through APSC. And don’t forget pest control, especially in humid areas like Mobile and Daphne, where bugs are active year-round.
- Get Insurance: Homeowners insurance is required if you’re financing, and flood insurance may be needed in FEMA-designated risk zones. Rates are higher in coastal areas like Orange Beach and Gulf Shores due to hurricane risk.
- Home Maintenance Plan: Schedule AC tune-ups at least twice a year, clear gutters regularly, and inspect roofs for storm damage or algae buildup. Consider wind mitigation upgrades to reduce insurance costs.
How to Buy a House in Alabama Without a Realtor?
Start by researching neighborhoods and browsing listings on trusted sites like Houzeo. Then, schedule showings directly with sellers or their agents. You can also hire a real estate attorney to review contracts and handle legal details.
Next, get pre-approved for a mortgage, make an offer, schedule inspections, and negotiate repairs. With the necessary due diligence, you can buy a house without a Realtor.
Should You Buy a House in Alabama?
Absolutely! Alabama offers incredible opportunities for homeowners, whether you’re buying for investment, residence, or vacation. Moreover, with more homes being sold below the list price, now’s the best time to buy a house in Alabama.
Whether you’re drawn to Huntsville’s growing job market or Mobile’s coastal charm, Alabama has it all. There’s a spot to match every lifestyle and budget. So if you’re on the hunt, check out our list of the best places to live in Alabama!
