How Mortgage Credit Certificate Program helps first time home buyers

If you have decided to by a home for the first time, then you can get help of first time home buyers programs offered by the state housing agencies. One such popular program is Mortgage Credit Certificate Program. Read this article to know about it in details.

Mortgage Credit Certificate Program – What it is

Mortgage Credit Certificate Program has become one of the popular first time home buyers programs as it helps the low and middle income people to own a property. To qualify for the program, the mortgaged property needs to be the principal residence of the borrower. The Mortgage Credit Certificate Program was approved by the Congress as a part of the 1984 Tax Reform Act. The MCC Program allows an eligible mortgage borrower to get an amount of federal tax credit on his/her annual mortgage interest. Another advantage is that the borrowers can continue getting the tax credit for the entire life of the mortgage loan that is, till the borrower pays back the loan in full.

However, in every state, there may be certain areas (target areas) that are exempted from this home buyer program. Moreover, the tax credit limit along with other eligibility criteria may differ from one state to the other.

MCC program – How it differs from one state to other

Like many other first time home buyers programs, MCC Program is primarily offered through state housing agencies. Major benefits and eligibility requirements remaining the same, the program may differ slightly from one state to another. Go through the following lines to know about MCC Program offered in Texas and Hawaii.

• In Texas – The Texas Department of Housing and Community Affairs offers MCC Program in Texas. In this state, the qualified mortgage borrowers can claim as much as 30% of the annual interest paid on the home loan. However, the maximum amount of tax credit should not exceed 2,000 USD per year.

• In Hawaii – If you stay in Hawaii, then you can apply for the Mortgage Credit Certificate to the Hawaii Housing Finance and Development Corporation (HHFDC) as it is the issuing authority. In Hawaii, you can get as much as 20% federal tax credit on your annual mortgage interest.

The federal government considers the MCC tax credit as a subsidy. So, you may be subjected to recapture tax, a federal tax, if you sell your home within 9 years of purchasing the property. You’ll also be subjected to this tax if you’re able to sell your property at a gain or your income exceeds the limits required for taking advantage of Mortgage Credit Certificate Program.
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