Mortgage credit certificates: do you know what they are?
Owners of federally taxed homes may be able to minimize their yearly tax bill by claiming a mortgage credit certificate. Even though MCCs provide for annual tax deductions of up to $2,000, the IRS has set a cap on this benefit. Most MCCs are intended for first-time, low-income homebuyers, though specific restrictions vary. Mortgage credit certificates (MCCs) are attractive financing tools that may be available to you if you’re applying for a loan through your state’s Housing Finance Authority (HFA). Tax credits can be claimed using IRS Form 8396 as long as your mortgage credit certificate is valid. This is possible whether or not you opt to itemize your deductions.
Each of the 50 states has its own system for obtaining a mortgage credit certificate. Every state in the union participates in a federal program that offers first-time homebuyers and those purchasing property in economically poor areas a tax credit.
There is a federal tax credit available for first-time homebuyers that is equal to thirty percent of the annual mortgage interest payments. A mortgage credit certificate can be used for up to half the purchase price of a brand new house. If you are a qualifying homeowner, you can receive a yearly credit of up to $2,000.
A buyer cannot have owned a primary residence in which they have lived for the past 36 months in order to be eligible for a mortgage credit certificate. Those who serve in the armed forces can get a one-time exception from this rule. If you are currently renting or have been divorced, this program may still be an option for you. To qualify for a mortgage on this property, you must not have used it as your primary residence anytime within the past three years.
Several mortgage lenders provide lending programs that can be combined with a mortgage credit certificate to waive the down payment altogether. You may be required to pay private mortgage insurance if your lender insists on including your down payment in the mortgage loan itself.
In several states, a mortgage credit certificate can be obtained even with a credit score below 700. In the state of North Carolina, the minimum required FICO score to participate in this program is 640. You may be required to meet certain requirements, such as having a certain amount of cash on hand. Several of the first-time buyer programs have a limit of $5,000 on liquid assets before you can apply.
Mortgage credit certificates are often associated with first-time homebuyer arrangement programs, and as such, participants must meet specific health and safety criteria.
Mortgages are being originated at a rate that is far higher than it was in past decades. A preapproval for the financial product you seek can be granted by some financial institutions in as little as three minutes. The chances of getting into a program, like the one a mortgage credit certificate would get you into, are affected by a number of factors. Most would-be homeowners who are interested in taking advantage of a program like this one find it helpful to work with a mortgage broker in their area.
There are no other options besides purchasing a home if you are tired of always having to pay rent. If you are purchasing property in the United States and have a mortgage credit certificate, you will be eligible for a tax credit equivalent to the mortgage interest you pay on the property. As with most first-time buyer assistance programs, there are restrictions and prerequisites to meet in order to qualify for this one. However, the voucher may not be suitable for some households.
Some of the requirements for participation in the program are reflected in the pros and cons that are most commonly cited when discussing mortgage credit certificates. You should be ready to show your lender a down payment, have a credit score that is high enough to get a mortgage, and maybe be able to afford a larger monthly payment than you’re used to making on a rental.
