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Your Guide to Buying a Home in Alabama

  • Most real estate purchases in Alabama are overseen by an attorney. 
  • In the state of Alabama, real estate closings can be completed by a non-attorney only when the person has an ownership share in the property. 
  • After a contract is signed, there are negotiations and inspections that must be completed. 
  • Although you have likely been pre-approved, you must complete the final application for a mortgage, which involves submitting more documents to the lender.
  • An appraisal of the property is likely needed for the Alabama purchase.
  • The final closing will usually take place with both the buyer and seller at the same table. 
  • The conforming loan limit for a single-family home is $647,200. This is the limit for all counties throughout the state. 

Buying a Home, Phase 1: Negotiations in Alabama

Once you reach a purchase agreement with a seller, you may think that your work is mostly done. That’s not quite true, as you still need to negotiate specific details about the property and the final transaction. 

  1. After agreeing on a price, you and the seller will sign a legal contract committing you both to the purchase. 
  2. At the same time, a deposit, known as earnest money, will be paid by you. This must be given to the attorney or representative overseeing the purchase process.
  3. The signed contract will be sent to an attorney or title company to begin a title search and prepare all transfer documents. 
  4. You will now have a chance to review and sign off on all disclosures, which are statements of known flaws or issues with the home. 
  5. You can now perform inspections on the Alabama property. Inspections may include a general inspection, a termite inspection, and a detailed lead-paint inspection. 
  6. If the property has a septic tank, the system must be inspected and verified.
  7. If the property uses well water, the water must be tested before the purchase. 
  8. Based on the inspection results, you can proceed with the purchase or request changes to the contract. If severe issues are discovered, you may be able to leave the contract without penalty. Usually the details are negotiated and an agreement is reached. 
  9. You can request a home warranty to cover the cost of appliance repairs or replacements. These warranties generally last one year.

Phase 2: The Alabama Mortgage Process

Although you have already completed a pre-qualification for your mortgage you’ll have to go through the process of making the loan final and official. This will include submitting more documents and having the property appraised. 

  1. First, you will need to submit a formal loan application. This can be done on your own or with the help of a lending professional.
  2. The lender will eventually deliver a “good faith estimate,” a calculation of the final costs to close the loan. This is simply an estimate but it’s usually close to the final number. 
  3. You will need to submit a variety of documents to the lender. These may include: 
    • Pay stubs: You will need paystubs from all employers, usually for the past two pay cycles.
    • Tax returns: Tax returns that show your annual earnings will likely be requested by the lending office. 
    • Bank statements: While some loans use bank statements as the sole document for income qualification, any mortgage can benefit from bank-account information. 
    • Debt information: If you have any debts, such as student loans, credit cards, or car loans, you’ll need to provide this information. Documents should include your debt totals, as well as your monthly payments. 
    • Financial disclosures: If there is anything that impacts your budget, either positively or negatively, this should be included. This may include child support, legal judgements, alimony, pensions, divorce decrees, or retirement income of any kind. 
    • Explanation on any credit inquiries: Recent credit inquiries increase your statistical chance of loan default. If there has been a rapid increase in credit inquires, lenders will want to know the purpose and whether new debt has been taken out. 
    • Information on any large deposits: A large deposit outside of your regular income should be documented with the lender. 
    • Gift letters: If you have received a gift that will be used as a downpayment, you may need to provide a gift letter, which describes the nature and source of the gift. 
    • Repeat or updated information: Lending offices need as much information as possible. As such, they may request duplicate or repetitive information. 

4. If approved, you will receive a loan commitment letter, which states the lender’s intention to finance your purchase. The loan commitment will have contingencies, including the successful completion of an appraisal. Also, you should deliver a copy of this letter to the seller or seller’s agent. 

5. The lender or mortgage broker will order an appraisal. Assuming the value is strong, the purchase can proceed. However, if the number comes back low, changes to the purchase agreement may be required. 

6. You will need to order homeowners insurance and deliver proof of this insurance to the lender’s office. 

While fairly straightforward, Phase 2 can take time. To make the process as easy as possible, begin gathering documents as soon as possible. Also, don’t take on new debts or change jobs, as this can disrupt the Alabama purchase process. 

Phase 3: Closing the Purchase in Alabama

The closing in Alabama will usually take place with both parties (buyer and seller) together at the same office (usually the attorney’s) to sign all documents. At the final closing, you will sign all the documents to complete the purchase, including loan papers. Once complete, you should be able to take possession of your new home. 

  1. The first step in closing the purchase is a title search, which is usually done well in advance of the final closing. This is a search to make sure there are no ownership issues with the home. 
  2. A final cash figure is calculated. This amount, which includes property taxes and utilities, will need to be paid in the form of a cashier’s check. 
  3. You should conduct a final walkthrough before the closing. This allows you to view the property one last time while making sure there is no new damage or issues with the home. 
  4. You and the seller will now meet at your schedule closing to sign all documents, including the sale and loan documents. 
  5. You will pay the remaining funds of your downpayment to the attorney or representative who is overseeing the process. 
  6. The purchase will be recorded with the appropriate municipality; usually the city or county. 
  7. You will receive the keys and can move into your new Alabama home!

Alabama Conforming Loan Limits

Conforming loan limits are determined by the Federal Housing Finance Agency, also known as the FHFA. This organization sets the limits on a county-by-county basis. Conforming loans, which include FHA, VA, and Fannie Mae-backed mortgages, are some of the most buyer-friendly options on the market, but they come with limits and requirements. 

The limits, however, are reasonable. Currently, the limit for a single-family home in the state of Alabama is $647,200.

You can use conforming loans to purchase a multiunit property in Alabama. The limit for a two-unit property is $828,700, while the limit for a three-unit property is $1,001,650. The maximum unit count is four; the limit for these properties in Alabama is $1,244,850. 

These are the limits for the entire state, including the Gulf counties of Mobile and Baldwin. The limits remain the same all the way to Houston County, which borders Florida and Georgia, as well as northern counties like Jackson and Lauderdale. 

These limits are for conforming loans only. Other options exist, including Alabama jumbo loans. Contact our staff for information on large loans in the state of Alabama. 

* Note: Conforming loan limits are subject to change. For updated limits, contact our team or call your local lending office. 

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