VA Loans in Alabama — the State That Fixed the Timing Problem

There is a circular problem in every state with a disabled-veteran property tax exemption, and almost nowhere has done anything about it.

The exemption lowers your property tax. Property tax sits inside the payment. The payment is what a lender measures. But you generally cannot document the exemption until you already own the house — so the file gets measured on a tax bill you are not going to pay.

Alabama legislated a fix.

I'm Jeff Moran, NMLS #483943, licensed to originate in Alabama through C2 Financial Corporation.

House Bill 77

Alabama is unusual in this, and most states handle veteran property tax relief differently again. Signed April 17, 2026, HB77 —

"Allows a 100-percent-disabled veteran to receive a tentative property exemption certificate at the beginning of their mortgage application process."

The Governor's office describes the purpose plainly: making it easier for a 100-percent-disabled veteran to qualify for a home loan.

A companion bill, HB155, removes the requirement for annual verification of homestead exemptions for permanent and totally disabled veterans who have already qualified — an administrative burden, removed.

One honest caveat. The announcement does not state an effective date or the certificate's mechanics, and implementation of a property tax measure in Alabama runs through county officials. Confirm current status and procedure with the county before relying on it, and raise it at application so there is time to.

Why this is a qualifying issue, not a tax tip

Worth being precise, because the distinction is the whole value of the bill.

The payment underwriting measures includes property taxes. A debt ratio is calculated against a payment that has taxes inside it, so an exemption that reduces the tax reduces the measured payment.

Without documentation the exemption is a plan rather than a fact, and a plan does not go in the file. A certificate at application turns it into a fact at the moment it can still matter — which is the difference between a number that works and one that does not.

If this applies to you, say so at application rather than at closing. What a real pre-approval involves is the wider picture.

Alabama taxes the mortgage, and VA did not name it

The other Alabama-specific thing on a VA file, and it points the opposite direction.

Alabama levies two recordation taxes — one on the deed conveying the property, one on the mortgage securing the debt. The structure is on the Alabama page, and the mortgage tax is unusual: most states charge fees alone.

Here is the part worth knowing. VA publishes a State Fees and Charges Deviations List of per-state exceptions from charges normally considered unallowable to a veteran. Georgia is on it specifically so its intangible tax may be charged to the veteran. Alabama's entry does not name its mortgage recordation tax.

Alabama's entry names something else entirely:

Closing Protection Letter · Redemption Bond is NOT allowed

That prohibition is the only one of its kind among the states I lend in — every other entry grants permission; Alabama's also withholds one.

I am not going to tell you what the absence of the recordation tax from that list means for your closing statement, because that is a determination for the parties conducting your closing rather than a conclusion to draw from a list. What I will tell you is to ask about it by name and get the allocation in writing, since it is a real charge and a no-down-payment purchase leaves less room to absorb one.

Price the scenario with both recordation taxes in it rather than a national average that models neither.

Your closing, and who is not advising you

Alabama is not straightforwardly an attorney-closing state. Preparing deeds, conveyances and mortgages is reserved to lawyers, while title and abstract companies may conduct their own title business — and case law holds that conducting a closing does not by itself amount to practising law.

So a non-attorney may run your closing and is not advising you. On a VA file that carries its own conditions — the Certificate of Eligibility, the funding fee treatment, VA's appraisal and minimum property requirements — it is worth knowing that the person at the table is administering the transaction rather than representing you.

Where the buyers are

Redstone Arsenal at Huntsville, Fort Novosel at Daleville in the southeast, Maxwell Air Force Base at Montgomery and Anniston Army Depot anchor a substantial veteran population, and Gulf-adjacent counties draw retirees.

One practical note for the coast: wind exposure and claims history push Alabama homeowners premiums above a national assumption, and insurance sits inside the same payment the exemption above reduces. Get the quote early.

What I would watch on this file: the recordation tax allocation, in writing, before anything is signed. In thirty years of originating I have never seen a charge argued about more productively before closing than after it.

Where to start

Run your numbers — no credit pull, no account, nobody calls you. Rates for your scenario, your debt ratio, and Alabama closing costs including both recordation taxes.

What a VA loan actually is and who qualifies covers eligibility, entitlement and the no-down-payment structure. If you are moving to Alabama on orders, what changes when you cross a state line is the wider picture.

Nothing here is a loan approval, a denial, a commitment to lend, or tax advice. VA's deviations list is versioned and changed most recently in February 2026, and the Alabama legislation above is recent enough that county implementation is worth confirming directly.

Common questions

Can a disabled veteran in Alabama prove a tax exemption before buying?

That is what House Bill 77 addresses. Signed April 17, 2026, it allows a 100-percent-disabled veteran to receive a tentative property exemption certificate at the beginning of the mortgage application process, which the Governor's office describes as making it easier to qualify for a home loan. The announcement does not state an effective date or the certificate's mechanics, so confirming current status and procedure with the county is worth doing.

Why does a property tax exemption affect what I qualify for?

Because the payment underwriting measures includes property taxes, and a debt ratio is calculated against that payment. An exemption that reduces the tax reduces the measured payment. The difficulty everywhere else is timing: an exemption you cannot document yet is a plan rather than a fact, and the file gets measured on a tax bill you will not actually pay.

Do I pay Alabama mortgage recordation tax on a VA loan?

Alabama levies recordation tax on mortgages as well as on deeds, and VA's State Fees and Charges Deviations List does not name that tax in its Alabama entry — unlike Georgia, which is named specifically so its intangible tax may be charged to the veteran. What that means for a particular closing statement is a determination for the parties conducting the closing, so the practical step is to ask about the charge by name and get its allocation in writing.

What does Alabama's VA deviation actually say?

Two things: a closing protection letter is allowable, and a redemption bond is expressly not allowed. The prohibition is unusual — most entries on the list grant permission for a charge that would otherwise be unallowable, while Alabama's also withholds one. The list is versioned and was last changed in February 2026.

Do I need an attorney for a VA closing in Alabama?

Not as a requirement, and the line is narrower than either simple answer. Preparing deeds, conveyances and mortgages is reserved to lawyers, while title and abstract companies may conduct their own title business, and case law holds that conducting a closing does not by itself amount to practising law. So a non-attorney may run the closing without advising you, which is worth deciding about before signing day.

Does homeowners insurance matter more on an Alabama VA purchase?

On the coast it often does. Wind exposure and claims history push Gulf-adjacent premiums above a national assumption, and insurance sits inside the same payment that property taxes do — the one a debt ratio is measured against. Getting a real quote early turns it from a closing-week surprise into a number you planned around.