According to real estate data obtained from Zillow, Alabama homes are currently holding at a median value of $130,300 compared to the median price of sold homes, which stands at $152,800.
One reason for this disparity is the relatively the state’s housing market, which puts sellers in a strong position to negotiate higher purchase prices. Homes in Alabama are on the market for a shorter length of time than other states, roughly 89 days on average, and price drops occur much less frequently.
The state’s median listing price sits at around $205,742, though some regions have significantly lower price points.
Alabama has seen median home values rise by 7.5 percent since 2017, a trend that is expected to slow down going forward. Zillow estimates a 3.7 percent rise during 2019, yet home values will remain far below the national median of $220,100.
These increases should not have a significant impact on the mortgage and refinance rates offered by Alabama lenders, so now may be a good time to purchase a home in the state.
To give you the best chances at an affordable rate, we’ve put together the following list of important factors to consider when shopping for a mortgage in Alabama.
Current Mortgage Rates in Alabama
Mortgage Rates Factors Rates in Alabama
Lending agents reference a number of important factors to determine what interest rates to offer, ranging from financial criteria to loan specifics.
Every loan rate is negotiated on a case-by-case basis, so a borrower’s economic standing and payment limitations are always taken into account. To get the best mortgage and refinance rates in Alabama, it’s important to understand what lenders will be looking for and why.
Loan type
every lender has its own catalog of mortgage and refinance products, often with a variety of different eligibility guidelines.
Fixed-rate mortgages allow borrowers to lock down a consistent rate over the full life of their loan whereas adjustable-rate options are based on a variable interest rate that may fluctuate over time.
It’s important to consider the difference between a conventional mortgage and refinance programs versus the government-backed options that many lenders facilitate.
Mortgages insured by the government, such as Federal Housing Administration (FHA), United States Department of Agriculture (USDA) and Veterans Affairs (VA) loans, usually have lower rates than conventional options, but they can be more difficult to qualify for due to the strict eligibility guidelines.
Loan term
after you’ve narrowed down the list of mortgage or refinance types, the next step is to decide which repayment term best suits your financial obligations.
Longer loan terms typically feature higher interest rates and lower monthly payments, making it a solid choice for homebuyers looking to settle down for several years.
Short repayment terms benefit from lower rates, but the higher monthly payments may be a burden for some low-to-moderate income borrowers. Selecting the best loan term depends on your level of income, how much you have stashed in savings and your plans for the future.
Credit score
when lenders calculate interest rates for mortgage and refinance loans, your credit score is one of the first financial metrics they consider.
Credit scores are seen as a general indicator of how well a borrower manages debt, which helps lenders evaluate program eligibility and formulate interest rates. Homebuyers with high credit scores can qualify for a wider selection of home loan programs and are able to negotiate for a more competitive rate.
Borrowers with low credit scores often have a harder time qualifying for a conventional mortgage and refinance loans, though there are several government-backed programs with low credit score minimums.
Credit history
in addition to credit scores, lenders also review borrowers’ credit histories before approving their mortgage or refinance loan application. Most lending institutions consider limited credit history as a high-risk factor as it introduces a degree of uncertainty into the application process.
Even if you’ve been approved, a sparse credit history may prevent you from landing the best available interest rate because the lender has no basis for judging whether you’ll be able to make your monthly payments consistently and on time.
Luckily, some lending institutions will allow you to submit non-traditional credit information, like utility bills and rent payments, though you should still expect a tough rate negotiation process.
How to Get the Best Mortgage Rates in Alabama
Securing the best mortgage and refinancing rates in Alabama starts with research and preparation. The only way to get a good deal is to understand your specific lending needs and anticipate the complex questions lenders will ask.
Your long-term goals and financial limitations should always be the driving force behind your search for the best available rates, so consider the following tips before you apply:
Review your finances
the first step to landing a competitive rate is to pool together all of your financial information, including your credit score and history, income level, debt-to-income ratio, and how large of a down payment you can afford.
Having this info on hand will help you confidently answer lenders’ questions during the application and negotiation process. It’s also helpful to review local housing market performance to get an idea for how the size, location, listing price and amenities of your home may impact the rates you’re offered.
Remember, the loan type and term you apply for should align with your specific economic standing and the debt you’re already paying off.
Weigh your options carefully
the next step is to shop around with different lenders to understand what mortgage or refinance options are available. If you have a high credit score you will likely qualify for a wide variety of home loans from different lending institutions, which may make it difficult to narrow your search.
Thinking about your long-term plans is a great place to start, as it will help you decide what loan type, fixed- or adjustable-rate, will best suit your needs. Borrowers with low credit scores may have fewer options to choose from, especially if they’re unable to make a large down payment.
Looking into government-backed programs, like FHA and USDA mortgages, is a great way to find an affordable loan if you’re unable to qualify for conventional alternatives
Ask lots of questions
When it comes time to start negotiating rates, make sure to bring along a comprehensive list of targeted questions that will keep the discussion focused on the information you need.
Most lenders are accustomed to working with borrowers who have limited experience with the mortgage and refinance application process, so many are accustomed to steering the conversation. Nearly half of all mortgage borrowers don’t shop around when buying a home, which can put them in a difficult position when an offer is made.
Don’t let lending agents pressure you into filling out paperwork unless you’re sure about the rate offer, and never be afraid to walk away from the negotiating table.
You should ask lenders about down payment minimums, private mortgage insurance requirements, credit score criteria, the benefits and limitations of each loan program as well as whether there are back-end fees.
Recommended Companies in Alabama
Alabama has a diverse collection of reputable lenders to choose from, which may make locating the best mortgage or refinance rates a challenge unless you have ample research time.
Reading online customer reviews can give you a general idea about a lender’s services, but contacting an agent directly is the quickest way to find out more.
Asking questions is a commitment-free activity, so don’t be afraid to shop around before you make a final decision. Some of the top mortgage lenders in Alabama are:
Quicken Loans
a nationally recognized lender, the company has earned the reputation as one of the best choices for a mortgage and refinance loans. This lender offers a 90-day rate protection guarantee that locks in your quoted rate to protect against market fluctuations during the negotiation process.
New American Funding
this lender regularly works with low-to-moderate income borrowers and homebuyers with credit scores as low as 580. The company offers a conventional fixed and adjustable-rate mortgages along with a variety of government-back programs, including FHA, USDA, and VA.
If you’re having a difficult time qualifying for a mortgage or refinance loan from other lenders, New American Funding may be the solution.
Rocket Mortgage
if you’re looking for fast approval, this lender boasts one of the most streamlined mortgage and refinance application processes in the country. Rocket Mortgage has ranked at the top of J.D. Power’s Primary Mortgage Origination Customer Satisfaction list for eight years in a row.
LendingTree
this online marketplace allows borrowers to compare rates from a wide variety of lenders all at once. Homebuyers looking for online comparative shopping can take advantage of LendingTree’s easy to use interface and search function.
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