How to buy a home in Alabama

Alabama has a warm Southern hospitality, rich history, and stunning landscapes like the Gulf Coast and Appalachian foothills. With home prices generally below the national average, buying a house in Alabama can be a great choice if you're looking for an affordable place to live.

Whether you already call Alabama home or you’re relocating for work, family, or a fresh start, the state offers an appealing lifestyle. We’ll outline what to know so you can start your home search in the Yellowhammer State with confidence.

Alabama’s housing market: At a glance

Understanding the housing market in Alabama

Before you start house hunting, it’s a good idea to understand Alabama’s housing market and how home prices can vary throughout the state.

The median home price is $288,500

In Alabama, home prices have increased 4.5% when compared with October 2024, according to Redfin. However, the median home sale price is significantly lower than the national average, $288,500 compared to $439,701.

You’ll find some areas that are both more and less affordable than Alabama’s state average Some major cities have additional housing inventory and might be more affordable than rural areas with fewer homes.

• In Montgomery, the median home price is $179,000.
• In Guntersville, the median home price is $300,000.

Neighborhood, home size, unique features, and nearby amenities also influence home prices in different areas. You can use the Rocket Mortgage home affordability calculator to help compare prices to see which cities may fit your budget best.

Market trends and inventory

Alabama has seen a 4.7% increase in newly listed homes for sale compared to last year. Each city in Alabama differs slightly, so working with an experienced real estate agent in your area can help you navigate the market.

Spring and summer are peak shopping seasons

During the spring and summer months in Alabama, more homes tend to hit the market, and buyer demand is higher. Shopping for a home in the early fall through winter may mean fewer competing buyers and the potential for better prices, though inventory could be more limited. Ultimately, the best time to buy a home is when you’re financially and emotionally ready.

How to buy a house in Alabama

Now that you know about Alabama’s housing market, we’ll guide you through the steps of buying a house in the state.

Step 1: Check your credit and set a budget

Before beginning your home search, examine your finances, such as your credit score, DTI, and potential budget. You can use the Rocket Mortgage® mortgage calculator to see what you could afford each month and how much you should save for your down payment and closing costs.

• Check your credit score
• Find out your debt-to-income ratio
• Save for a down payment
• Plan for closing costs and additional fees
• Finalize your budget

Step 2: Decide on the type of financing you want

There are several loan types to consider, depending on your credit score, down payment amount, and location.

• Conforming conventional loans. These loans typically require a minimum 3% down payment, and are offered by private lenders. You’ll have to pay private mortgage insurance (PMI) if your down payment is lower than 20%.
• Jumbo loans. These are conventional loans that exceed conforming loan limits. They usually require a higher credit score, down payment, and additional cash reserves.
• FHA loans. These are government-backed loans through the Federal Housing Administration. These loans offer lower down payments depending on your credit score.
• VA loans. These loans are for qualifying service members and surviving spouses and require no down payment. They are backed by the Department of Veterans Affairs.
• USDA loans. These loans are for home buyers in qualifying rural areas, with no down payment requirement. They are backed by the U.S. Department of Agriculture.

Step 3: Apply for preapproval

A mortgage preapproval gives you a clear idea of how much you can borrow when buying a home in Alabama. Having a preapproval early in your search can help you stand out, especially in competitive areas.

During the preapproval process, lenders review your credit score, income, and assets to determine which loans you may qualify for, your potential interest rate, and the loan terms. The process typically takes just a few days.

Step 4: Find a real estate agent in Alabama

Choosing a local real estate agent in Alabama makes the home buying process smoother, as they have a deep understanding of the area. You can find a great real estate agent through sites like Redfin.com or through your family and friends.

In Alabama, dual agency is allowed if both parties have written consent. Dual agency allows one agent to represent both buyers and sellers in the transaction. Be sure to ask your agent before signing a buyer's agent agreement.

Step 5: Start house hunting

After finding a few cities that fit your home buying goals, it’s time to look at homes for sale. Work with your real estate agent to look at homes for sale on the MLS and sites like Redfin to narrow down the homes you want to see in person.

Key factors to consider:

• Proximity of the neighborhood to schools, jobs, and amenities
• Public transit, major roads, and highways
• HOA fees and potential costs
• Costs of property taxes in the city

Step 6: Make an offer and negotiate

Your real estate agent will guide you through making an offer on a house in Alabama. You’ll work together to decide how much to offer, which contingencies to include, and how much to put down as an earnest money deposit. This deposit shows the seller you’re committed to purchasing the home and is typically 1% – 3% of the purchase price, later applied toward your down payment.

It’s important to consider including a home inspection contingency in Alabama. Alabama is a caveat emptor or “buyer beware” state. So, the buyer is responsible for uncovering any issues with the property. Unless asked directly, the seller does not have to disclose any defects with the home, except for issues that might pose a health or safety risk. If there are significant problems discovered in the home inspection, you would be able to back out of the deal and get your earnest money back.

Step 7: Begin the closing process

Now that your offer is accepted, you’ll:

• Submit your earnest money
• Officially apply for a mortgage
• Read through the closing documents
• Schedule the appraisal and inspection
• Prepare for closing day
• Have a final walkthrough

In Alabama, closing costs are typically 3% – 6% of the home’s purchase price. Closing costs can cover loan origination fees, home inspection costs, mortgage points, insurance, property taxes, and escrow fees. 

FAQ about buying a home in Alabama

Here are some of the top frequently asked questions about buying a home in Alabama.

How much are property taxes in Alabama?

The effective property tax for Alabama is 0.38%, but local property taxes might differ.

Do I need a real estate agent to buy a home in Alabama?

A great real estate agent can help you find your dream home and navigate the home buying process, but you technically don’t need one to buy a home in Alabama. 

How long does it take to close on a house in Alabama?

In Alabama, it typically takes 30 to 60 days to close on a home. Loan approval and home inspection issues could affect this timeline.

Are there any specific factors that could affect the home buying process?

As mentioned above, buyers should ask if there are any defects with the property. Some areas in Alabama may require you to carry flood insurance.

The bottom line: There’s a home in Alabama waiting for you

Home prices in Alabama are still relatively affordable compared to many parts of the country. The state’s aerospace, material manufacturing, and education industries, and low property taxes, make it an attractive place to live. By working with a trusted real estate agent and preparing your finances, you can feel confident buying a home in Alabama.

If you’re ready to buy a home in the Yellowhammer State, start the mortgage approval process with Rocket Mortgage for a personalized plan that fits your financial goals.

Rocket Mortgage, LLC, Rocket Homes Real Estate LLC, RockLoans Marketplace LLC (doing business as Rocket Loans), and Rocket Money, Inc., are separate operating subsidiaries of Rocket Limited Partnership. Redfin Corporation is an affiliated business of Rocket Limited Partnership. Each company is a separate legal entity operated and managed through its own management and governance structure. Rocket Limited Partnership is an indirect, wholly owned subsidiary of Rocket Companies, Inc. (NYSE: RKT).

Rocket Mortgage is a VA-approved lender, not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency.

Rocket Mortgage is not acting on behalf of FHA or HUD.

The 3% down payment option is only available on certain conventional loan products and is not available in all states. Additional terms and conditions may apply.