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How Much Will Your Mortgage Be in Alabama?

Alabama, also known as the "Heart of Dixie", the "Yellowhammer state", and the "cotton state" is located in the southeastern region of the U.S. The housing market here has grown over the years and is one of the most affordable in the U.S. Alabamians spend roughly 18% of their income of their homes, significantly less than the national average spend. Also, see Alabama FHA Loan for more details and requirements for a home in the state.

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Alabama Home and Mortgage
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Factors That Can Affect Your Alabama Mortgage Calculations

Home Prices in Alabama

With approximately five million residents, Alabama is the 24th most populous state in the U.S. Alabama has seen a steady growth in property prices over the past few years with home values rising 5.5% over the past year alone. The median listing for a home in Alabama is $220,000 and the median price of homes sold is $168,800. Prices are based on information collated in March 2020.

Birmingham is the most populous city in Alabama. Home values in Birmingham have gone up a considerably: 10.6% over just the past year, and have a median value of $64,840. Huntsville, north of Birmingham near the border of Tennessee is the second most populous city in Alabama. The median listing in Birmingham is $259,900 and the average sale price is $170,300.

Montgomery, Alabama’s capital is situated toward the center of the state. Homes in Montgomery have a median list prices of $145,000 and an average sale price of $121,000. Located near the Gulf of Mexico is the historic town of Mobile. The median price of homes currently listed here is $167,975 and the median price of homes sold is $144,500. Home values in Mobile have risen 5.7% over the past year.

Property Taxes in Alabama

Alabama’s property taxes are some of the lowest in the country. Counties in Alabama collect on an average of 0.33%. The average homeowner pays under $558 annually, which is about a quarter of the national average.

Alabama Job Stats to Consider

Alabama’s economy is largely agricultural with a heavy concentration on cotton, peanuts, soybeans and maize. The state has also seen a continued growth in the service sector over the past few years. Alabama’s expanding automotive manufacturing industry has generated more jobs and significantly more wealth to the state since the 1990s. The state is ranked fourth in the nation for vehicle exports.

The median household income recorded in Alabama was $49,861, far below the national average of $61, 937, based on information collected form the Census ACS 1-year survey in 2018. However, this rose 5.09% in three years. The unemployment rate was recorded at 2.7% in November 2019, below the national average of 3.6%, according to information gathered by the Bureau of Labor Statistics.

Income tax in Alabama is also lower than many states with three tax brackets ranging from 2% to 5%. The statewide sales tax is 4% with counties charging a local tax for a total between 5% and 11.5%.

Alabama Job Stats

Job Stats (Civilian Labor Force, Employment, Unemployment)

Other Alabama Costs That Can Affect Alabama Mortgage Calculations

Homeowners Insurance in Alabama

Homeowner’s insurance in Alabama is more expensive than the national average $1,211 due to the state’s weather conditions. The average homeowner spends $1,850 annually. Most premiums will cover theft, lightning, hail, wind, smoke damage, and more. Lightning and wind damage are common claims in the state from serious storms and tornadoes coming from the Gulf of Mexico.

Flood damage is not typically covered by most homeowner’s insurance premiums. Homeowners should consider purchasing an extra policy through the National Flood Insurance Program (NFIP) especially for homes situated near the Gulf of Mexico. This will also cover hurricane and tornado damage caused by wind. Earthquake coverage can also be purchased at an additional cost.

Closing Costs

Homebuyers in Alabama can expect to pay between 1.33% and 2.65% of the final purchase price in closing costs. Since most homes in the state sell between $100,000 and $200,000, closing costs in this range fall between $1,326.50 and $5,306.

Title Insurance

Title insurance is a necessary prevention against any future unforeseeable claims that might made against the owner and the mortgage lender regarding the property’s title. These claims could be found in the public records but may have been overlooked at the time of purchase, even with the most thorough examination. Your lender will usually require a policy that equals the amount of the loan.

Real Estate Transfer Tax

Real estate transfer tax is calculated at a rate of $0.50 per $500 or 0.1% of the house’s final sale amount, which is significantly lower than most other states. Homebuyers typically pay the tax but partial payment from the seller can be negotiated.

Home Inspection

A home inspection is an important part of the buying process in Alabama to assess the property for any possible issues regarding its structure. This will include the foundation, roofs, basements, plumbing, heating and cooling systems, and electrical aspects of the home. The cost of a home inspection will ultimately depend on the area and the square footage of the home, but buyers in Alabama can expect to pay approximately $325. Tests for termites, pests, mold, and radon can also be carried out at an additional cost.

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