Mortgage Credit Certificate
A Mortgage Credit Certificate (MCC) entitles qualified home buyers to reduce the amount of their federal income tax liability by an amount equal to a portion of the interest paid during the year on a home mortgage. This tax credit allows the buyer to qualify more easily for a loan by increasing the effective income of the buyer. The borrower can claim a tax credit equal to 20% of the interest paid during the year. Since the borrowers taxes are being reduced by the amount of the credit, this increases the take-home pay by the amount of the credit. The buyer takes the remaining 80% interest as a deduction. When underwriting the loan, a lender takes this into consideration and the borrower is able to qualify for a larger loan than would otherwise be possible.
The Mortgage Credit Certificate (MCC) Tax Credit program operates as a federal income tax credit, reducing the Borrowers’ potential federal income tax liability. This credit, in effect creates additional net spendable income which Borrowers may use toward their monthly mortgage payment. This may enable first-time homebuyers to convert a portion (currently twenty percent [20%]) of their annual mortgage interest into a direct income tax credit on their U.S. individual income tax return for the life of their loan. The amount of the MCC Tax Credit cannot exceed the amount of a Borrower’s annual federal income tax liability. Unused portions of the credit may be carried forward for up to three (3) years.
For full details about this MCC program from CalHFA, Click here
The MCC Tax Credit can be used with a conventional or government first mortgage loan. It can also be combined with:
- CalPLUS
- CalHFA FHA
- California Homebuyer’s Downpayment Assistance Program (CHDAP) or Extra Credit Teacher Home Purchase Program (ECTP)
- Energy Efficient Mortgage (EEM)
- Any non-CalHFA first mortgage
For full details about this MCC program from CalHFA, Click here
Qualification:
- Borrower must qualify and obtain a first mortgage from a participating lender
- Borrower must be a First Time Homebuyer or have not owned a principal residence in prior 3 years
- Easy Documentation
- FHA, VA, or Conventional financing only
- Family Income and purchase price limits apply
Program Benefits:
- Federal tax credit up to 20% of the annual mortgage interest
- Option to utilize a monthly payroll tax savings
- May assist in loan qualification with 1st trust mortgage loan
- Credit is available for the life of the loan and may be re-issued if the loan is refinanced
For full details about this MCC program from CalHFA, Click here