Why Every First-time Home Buyer Should Ask About a Mortgage Credit Certificate

June 3, 2016 | by Michael Wilt

Categories: First Time Buyer, Homeownership, Homes for Texas Heroes

In honor of National Homeownership Month, TSAHC is doing a blog series this June highlighting our homeownership programs. In this week's blog, we are featuring the Mortgage Credit Certificate (MCC) program.

What is a Mortgage Credit Certificate?

Established by Congress as part of the Deficit Reduction Act of 1984, the Mortgage Credit Certificate is a dollar-for-dollar federal income tax credit equal to a percentage of the interest a homeowner pays on their mortgage loan. Homeowners with an MCC can take an annual tax credit of up to $2,000.

How does it work?

Check out the chart for an example of how MCC works and the explanation below (we apologize, but it requires some math).

In the example above, you have a $120,000 mortgage with an interest rate of 4.75% and an MCC rate of 40%. Your interest would be $5,700 in the first year. 40% (MCC rate) of that interest is $2,280, but since the tax credit is capped at $2,000, that is the credit you would receive. However, you can carry over that additional $280 to use in the next three years.

Homeowners can take an MCC credit on their income taxes every year they occupy the home as their principal residence which means it has the potential to save home buyers thousands over the life of a loan.

Who is eligible?

TSAHC's MCC Program serves the same populations eligible for down payment assistance through our Homes for Texas Heroes and Home Sweet Texas Home Loan Programs. Additionally, MCC can be combined with our down payment assistance.

However, only first-time home buyers or individuals who have not owned a home in the last three years are eligible for an MCC. Veterans are exempt from the first-time home buyer requirement. To receive an MCC, home buyers must apply for the MCC program when they are purchasing the home.

Ready to Leap into Homeownership?

As a reminder, TSAHC is offering webinars every Wednesday in June to help Texas families and individuals navigate the home buying process. We encourage you to sign up for one today to learn the 10 steps to buying a home and find out more about our home buyer programs.


On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.

Comments

Laura Ross

Hi HH, please contact our Homeownership Hotline at 877-508-4611 for assistance with your questions.

H H Wyatt

Good Afternoon:

I am writing to learn more about the down payment assistant program you offer. My husband and I would be considered as first time home buyers, however have been told we are not eligible due to our income.  We have been pre-approved, but due to some financial set backs, have fallen $8000 short of our down payment of $15,000. We have sent our own Earnest Money to the title company, paid the owner the option fee, scheduled to have the inspector and appraisal done within the next week or two (an addition $1100 out of our pocket).  The Seller have agreed to pay the closing cost and title fee. We have approximately $7000, but are in need of an additional $8000.  I am writing this comment to see if there is any possible way for hard working Americans such as my husband and me to obtain a grant for the remainder of the down payment. Of course we are working to try and come up with it on our own, but welcome any advice or assistance we can get concerning obtaining the down payment for our American Dream. I have a retirement account that will not allow me draw more than $6000 which is part of the $7000, I mentioned above. My husband’s profit sharing plan will not allow him to withdraw until he is 62.

Thanks for taking the time to read my comment as we are desperately seeking assistance or advice on where to obtain the help.

 

kclaflin@tsahc.org

Hi Sonqueia, as long as you have taken the home buyer education class within the past year, you do not need to take the class again.  If you have any further questions, please feel free to call our homeownership hotline at 877-508-4611.  Thanks!

Sonqueia Lacey

I took the seminar in tarrant county but I’m interested in buying a house in Dallas county do I have to take the class again?

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