Buying and moving into a new home is one of life’s great experiences, especially if you’re buying your first home. From getting that pre-approval to the “yes!” response on an offer to closing and moving in, every step is exciting. And while the process is engaging and fun, it’s important to prepare for moving day […]
What is mortgage interest credit?
You may qualify for a mortgage interest credit depending on your annual income. Mortgage interest credit is a mortgage assistance program that allows home buyers to claim a dollar-for-dollar tax credit. This tax credit can be up to $2,000 for a portion of their mortgage interest.
To get their tax credits, the borrower must fill out and submit the correct form to the IRS each year. The Mortgage Credit Certificate Tax Credit will vary considerably depending on the MCC Program, state, county, or city and the amount of the homebuyer’s loan, their interest rate, and the loan term.
If you are a first-time homebuyer interested in mortgage interest credit, here is what you need to know:
Designed to help lower- to moderate-income earners
Mortgage interest credit is designed to help lower- to moderate-income earners make their monthly payments more affordable as long as they own the home. Borrower criteria include:
- Income & sales price limits, which vary by state
- Must be a first-time homebuyer
- Must use the home as the primary residence
- Must take homeownership education courses, which vary by state
If a borrower is not a first-time homebuyer, they may still be able to qualify if they purchased in an area designated economically distressed.
You will need a mortgage credit certificate
A mortgage credit certificate (MCC) is needed to gain mortgage interest credit. This certificate is issued with the originating lender after the purchase contract has been signed but before closing. When done beforehand, it may help borrowers get approved since their tax liability has been lowered.
When applying for a mortgage credit certificate, borrowers must pay a non-refundable fee.
Mortgage interest credit programs are state & local issued
These programs are issued by state and local Housing Financing Agencies (HFA). Since each program varies by state, borrowers need to research the program in the state in which they wish to purchase a property. Work closely with a trusted lender to understand the program and its requirements.