What is a Mortgage Credit Certificate?
Many first-time homebuyers have never heard about a Mortgage Credit Certificate (MCC). Which is unfortunate because an MCC can save a homeowner some serious money over the life of their mortgage loan, starting the very first year.
When an MCC is issued to a homeowner, he/she can file for a tax credit on their federal income taxes equal to a portion of the annual mortgage interest paid. It is a dollar-for-dollar reduction in federal income tax liability.
The MCC rate for the GSFA MCC Program is 20%, so 20% of the annual mortgage interest paid can be taken as a tax credit. (The remaining 80% of mortgage interest paid can still be taken as an itemized tax deduction(1).
The MCC remains in effect for the life of the mortgage loan, so long as the home remains as principal residence. The amount of the annual mortgage credit is calculated on the basis of 20% of the total interest paid on the mortgage loan for that year.
Who Qualifies for a GSFA MCC?
Homebuyers apply for the GSFA MCC through a Participating Lender. The Participating Lender will perform an initial qualification and assist the homebuyer in completing the MCC submission forms. The Lender then submits the MCC application at the same time the loan application is submitted for approval.
The five basic qualifications are:
- The homebuyer must be a "first-time" homebuyer(2);
- The total household income must fall within the Program Income Limits;
- The home being purchased must fall within the Program Sales Price Limits;
- The homebuyer must intend to live in the home being purchased as their primary residence.
- The home must be located in one of the Program's eligible counties.
(See Income & Sales Price Limits for a current list of eligible counties).
(1) Program highlights only. Homebuyers are encouraged to consult with a tax advisor regarding the impact of an MCC on their individual tax liability.
(2) First-time homebuyer is defined as someone who has not owned a primary residence in at least three years. The first-time homebuyer requirement is waived if the homebuyer is purchasing in specific areas called "targeted areas" or if he/she is a U.S. veteran.
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