Mortgage Credit Certificate

src: www.texasfivestarrealty.com

In the United States, the Mortgage Credit Certificate (more commonly referred to as the MCC) is a certificate issued by a particular state or county government that allows taxpayers to claim a tax credit for some part of the mortgage interest paid during the tax year given.

Video Mortgage Credit Certificate

Usage

The MCC program is designed to help home buyers first offset a portion of their mortgage interest on a new mortgage as a way to help home buyers qualify for a loan. Because it is a tax credit and not a tax deduction, mortgage lenders will often use an estimated monthly credit amount as an additional income to help prospective borrowers qualify for a loan.

Maps Mortgage Credit Certificate

Qualify & amp; Example

In general, home buyers seeking MCC must meet certain minimum guidelines:

1. Buyers should not stay at home they had in the previous three years.
2. Buyers must meet price and purchase price restrictions.
3. The buyer should intend to use the new house as the primary residence.

Some of these restrictions may be waived for certain circumstances. For example, after a natural disaster, the state or local government can raise or remove the earnings limit for the temporarily affected city to help spur rebuilding.

MCC Credits can be used with Conventional/Appropriate home loans, FHA, USDA and VA. These credits can help home buyers qualify for "smaller" (more expensive) homes. While all homeowners can claim a detailed tax break for credit interest, you can go further with the MCC. MCC reduces your tax liability, dollar-for-dollar, with a percentage of the mortgage interest you pay.

The number of allowed mortgage loans varies depending on the state or local government issuing the certificate, but is limited to a maximum of $ 2000 per year if your country rate is more than 20%, by the IRS. For example, if a home buyer accepts an MCC offering 30% credit on a $ 200,000 loan for 30 years at an interest rate of 6%, the allowable tax credit will be described as follows (all numbers are rounded):

• Prepaid Mortgage Interest (Year One): $ 11,933
• x MCC Credits: 30%
• = Total Credits: $ 3579

Because the total credit in this example exceeds the IRS $ 2,000 limit, home buyers will report a $ 2000 credit on their tax return. Buyers can continue to receive tax credits as long as they stay home and maintain a mortgage.

src: floridahousing.org

External links

• IRS 530 Publications, Tax Information for First-Time Home Buyers

src: www.calhfa.ca.gov

References

Source of the article : Wikipedia