Our Alabama DSCR loan page covers the statewide basics: landlord rules, deposit limits and closing steps. This post does one job. It ranks eight cities on how much room the HUD rent leaves after the mortgage, then shows what Alabama's rental tax class adds on top.

Every figure below was checked on November 13, 2026 against HUD User, the Census Bureau QuickFacts tables and the Alabama Department of Revenue.

The Eight City Ranking

Birmingham leaves about $926 a month of three bedroom rent after principal and interest at its median value, the most of any city here.

The setup is the same for every row: the city's median value of owner occupied homes from the Census Bureau's 2020 to 2024 survey, 25% down, a 30 year amortization at Freddie Mac's 7.11% average for the week of November 12, 2026, and HUD's FY2027 three bedroom Fair Market Rent for the county's HUD area. The survey rate is my measuring stick only. It is a conventional average, not a DSCR rate and not a quote from us.

Rent to principal and interest is not your DSCR. The lender divides rent by the full payment, which adds property tax, insurance and any HOA dues, so every number in the last column drops once those land. It is still the cleanest way to compare cities on one screen, because it isolates the two numbers that move the most from place to place: price and rent.

Why Birmingham, Montgomery and Mobile Lead

They lead because their median values sit under $200,000 while HUD's rent benchmarks sit near or above $1,450 for a three bedroom.

Birmingham shares its HUD area with Hoover and four counties: Bibb, Blount, Jefferson, Shelby and St. Clair. That pairing explains the odd result at the top and bottom of the table. Both cities get the same $1,727 three bedroom benchmark, but Birmingham's median house costs well under half of Hoover's. The Birmingham figure also rose $144 from FY2026, from $1,583.

Montgomery got the biggest three bedroom raise on the list, $172, from $1,304 to $1,476. Its HUD area covers Autauga, Elmore, Lowndes and Montgomery counties, so a house in Prattville or Wetumpka is measured against the same figure. With a $161,900 city median, that raise alone adds about 0.21 to the rent to payment number at the median.

Mobile is its own HUD area, Mobile County alone, and its three bedroom figure went from $1,414 to $1,474. The city median of $193,300 still leaves about $499 a month after principal and interest. Coastal insurance is the line to watch there, and it can eat much of that cushion on an older roof.

A low median is not the same as a good street. These cities have wide ranges inside them, and the cheapest blocks carry the highest vacancy and repair risk. Use the median to choose a market, then underwrite the house on its own rent comps.

The Middle of the Pack

Decatur, Huntsville and Tuscaloosa all clear 1.00 on principal and interest alone, but with less than $260 of room.

Decatur's HUD area pairs Morgan and Lawrence counties and pays $1,315 for a three bedroom, up from $1,262. Huntsville's area, Madison and Limestone counties, pays $1,735, up from $1,690, which is the highest three bedroom figure in the state on this list. Huntsville's $293,600 median absorbs most of it. Our Huntsville rental property DSCR guide runs that market with Madison County's real millage, district by district.

Tuscaloosa is the one market on this list where HUD lowered the three bedroom figure, from $1,490 to $1,470. Its area covers Tuscaloosa and Hale counties. With 42.9% of homes owner occupied, the lowest share of the eight, the city leans heavily on renters, many of them students, and the lease calendar matters as much as the rent.

Run the DSCR on your deal

Where the HUD Rent Falls Short

In Auburn and Hoover, the HUD three bedroom figure does not cover principal and interest at the city median.

Auburn's $364,800 median and Hoover's $412,200 put principal and interest above $1,800 and $2,000 a month. The HUD rent would need to be about $293 and $353 higher just to break even on the mortgage, before tax. That does not rule either city out. It means a DSCR deal there usually needs a lower price, a bigger down payment, an interest only payment or a rent well above the HUD benchmark. Hoover's own Census median gross rent of $1,457 is the highest of the eight cities, which tells you the market does pay more than average. Ratios as low as 0.50 are possible on our program, but a ratio under 1.00 means the rent does not cover the payment, and you should know that going in.

Turned into price ceilings, the $1,727 Birmingham area rent covers principal and interest up to about $342,300 with 25% down at the survey rate, and Auburn's $1,548 covers it up to about $306,800. Our 1% rule vs DSCR post shows why rent to price shortcuts only get you halfway.

The 20% Rental Tax Class

Alabama assesses a rental at 20% of its appraised value, twice the 10% rate on a home its owner lives in.

The Alabama Department of Revenue puts single family owner occupied homes in Class III at 10% and everything not otherwise classified in Class II at 20%. A rental lands in Class II. Your bill is the assessed value times the total millage, with each mill worth $1 per $1,000 of assessed value. So every 10 mills of total levy costs a rental 0.2% of its value a year, and costs the owner occupant next door 0.1%.

Multiply the first column by the parcel's total millage divided by 10. A Birmingham rental sitting under 50 total mills, for example, would pay about $132 a month. The state's own share is 6.5 mills everywhere, split into 3.0 for public schools, 1.0 for the soldier fund and 2.5 for the general fund. Taxes are due October 1 and become delinquent after December 31, so a closing in the fall can put a full year's bill right in front of you.

City Millage Lines Compared

The city's own levy line runs from 5.0 mills in Dothan to 35.0 in Huntsville on the Department of Revenue's October 2024 table.

This is only the city line. The state's 6.5 mills, the county levy and any county or district school levy come on top, and the table does not print one combined total for each city. Mobile's own city line is just 7.0 mills, but the Mobile and Prichard school district adds 29.5 more. Pull the parcel's actual bill from the county revenue commissioner before you trust any total, including mine.

Loan Terms That Matter in Alabama

At Alabama prices, most loans sit far below the lines where reserves come into play.

• Reserves: none required with a loan under $1 million and an LTV under 75%. No asset sourcing, no large deposit sourcing and no seasoning.
• Interest only: ten years on a 40 year term, or a 30 year term with interest only, at up to 70% LTV on a purchase. In Auburn or Hoover, that lower payment can close much of the gap. See our FY2027 Fair Market Rent breakdown for how the new figures move ratios across states.
• Gifts: a 100% gift can cover the down payment, closing costs and reserves.
• Cash out: up to 80% LTV with no ownership seasoning, handy after a Birmingham rehab.
• First rental: no primary residence ownership or VOR needed, and loans up to $5 million.

Whether the loan closes in an LLC, and how a duplex or a short term rental is treated, are confirmed per file on a call. Our loan programs page lists the other options if DSCR is not the right fit.

Honest Caveat

Medians and HUD benchmarks are where you start, not where the lender ends.

How I Would Pick an Alabama City

1. Start with the rent to payment gap in the ranking, then shortlist two or three cities.
2. Pull rent comps for the bedroom count on the exact blocks you like.
3. Get the parcel's total millage and multiply by 20% of the price.
4. Get a landlord insurance quote before the offer, especially near the coast.
5. Check the city's short term rental and zoning rules if you plan anything but a long lease.
6. Send us the address. We run the DSCR the way the lender will.

Sources

All sources checked November 13, 2026. Data changes, so confirm before you rely on it.

1. HUD User, FY2027 Fair Market Rents, Jefferson County, AL (Birmingham Hoover HUD Metro FMR Area). 3 bed $1,727 (FY2026 $1,583); area of Bibb, Blount, Jefferson, Shelby and St. Clair counties
2. HUD User, FY2027 Fair Market Rents, Madison County, AL (Huntsville MSA). 3 bed $1,735 (FY2026 $1,690); area of Madison and Limestone counties
3. HUD User, FY2027 Fair Market Rents, Montgomery County, AL (Montgomery MSA). 3 bed $1,476 (FY2026 $1,304); area of Autauga, Elmore, Lowndes and Montgomery counties
4. HUD User, FY2027 Fair Market Rents, Mobile County, AL (Mobile MSA). 3 bed $1,474 (FY2026 $1,414)
5. HUD User, FY2027 Fair Market Rents, Tuscaloosa County, AL (Tuscaloosa HUD Metro FMR Area). 3 bed $1,470 (FY2026 $1,490); area of Tuscaloosa and Hale counties
6. HUD User, FY2027 Fair Market Rents, Lee County, AL (Auburn Opelika HUD Metro FMR Area) and Morgan County, AL (Decatur MSA). Auburn 3 bed $1,548 (FY2026 $1,494); Decatur 3 bed $1,315 (FY2026 $1,262), area of Morgan and Lawrence counties
7. U.S. Census Bureau QuickFacts, Birmingham, Huntsville, Montgomery, Mobile, Tuscaloosa, Auburn, Decatur and Hoover cities, Alabama. Median value of owner occupied housing units, owner occupied rate and median gross rent, ACS 2020 to 2024 (Decatur and Hoover from the companion table)
8. Alabama Department of Revenue, Property Tax Assessment. Class II, all property not otherwise classified, 20%; Class III, single family owner occupied residential, agricultural and forest, 10%
9. Alabama Department of Revenue, Millage Rates by County (October 2024 table). State 6.5 mills (public school 3.0, soldier 1.0, general fund 2.5); city lines Huntsville 35.0, Hoover 30.5, Birmingham 28.5, Auburn 26.0, Decatur 18.6, Tuscaloosa 13.5, Montgomery 12.5, Mobile 7.0, Dothan 5.0; Mobile and Prichard school 29.5
10. Alabama Department of Revenue, When are my property taxes due?. Due October 1, delinquent after December 31
11. Freddie Mac Primary Mortgage Market Survey. 30 year fixed average 7.11% as of November 12, 2026 (reference only)

Frequently asked questions