Brai is the founder of SW4 Insights, a public policy advisory firm based in Washington D.C. He has over a decade of experience as a journalist and consultant covering finance and economic policy, with a particular focus on distilling complex topics t.
Brai Odion-Esene ContributorBrai is the founder of SW4 Insights, a public policy advisory firm based in Washington D.C. He has over a decade of experience as a journalist and consultant covering finance and economic policy, with a particular focus on distilling complex topics t.
Written By Brai Odion-Esene ContributorBrai is the founder of SW4 Insights, a public policy advisory firm based in Washington D.C. He has over a decade of experience as a journalist and consultant covering finance and economic policy, with a particular focus on distilling complex topics t.
Brai Odion-Esene ContributorBrai is the founder of SW4 Insights, a public policy advisory firm based in Washington D.C. He has over a decade of experience as a journalist and consultant covering finance and economic policy, with a particular focus on distilling complex topics t.
Contributor Rachel Witkowski Correspondent/EditorRachel Witkowski is an award-winning journalist whose 20-year career spans a wide range of topics in finance, government regulation and congressional reporting. Ms. Witkowski has spent the last decade in Washington, D.C., reporting for publications i.
Rachel Witkowski Correspondent/EditorRachel Witkowski is an award-winning journalist whose 20-year career spans a wide range of topics in finance, government regulation and congressional reporting. Ms. Witkowski has spent the last decade in Washington, D.C., reporting for publications i.
Written By Rachel Witkowski Correspondent/EditorRachel Witkowski is an award-winning journalist whose 20-year career spans a wide range of topics in finance, government regulation and congressional reporting. Ms. Witkowski has spent the last decade in Washington, D.C., reporting for publications i.
Rachel Witkowski Correspondent/EditorRachel Witkowski is an award-winning journalist whose 20-year career spans a wide range of topics in finance, government regulation and congressional reporting. Ms. Witkowski has spent the last decade in Washington, D.C., reporting for publications i.
Correspondent/EditorUpdated: Sep 29, 2023, 8:59am
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The decision to buy a home can be daunting, especially if it’s your first time and you’re competing in a hot housing market. Even if you easily qualify for a mortgage loan, the money you need for a down payment—plus closing costs—raises significant obstacles for new homebuyers.
This is why several federal and local government programs exist to increase homeownership opportunities for as many Americans as possible, particularly those with low to moderate incomes. These programs, including the mortgage credit certificate, help you take that initial step on the first rung of the property ladder.
MCCs are intended to help first-time homebuyers qualify for a mortgage by lowering the size of their mortgage payments. It is a program, overseen by state housing finance agencies (HFAs), that gives the home purchaser a significant tax credit linked to the interest they pay on the home loan.
MCCs are issued to qualifying borrowers by lenders who partner with the state HFAs. Once you have a MCC, you are then entitled to take a nonrefundable federal tax credit equal to a specified percentage of the interest paid on your mortgage loan each year.
These tax credits can be claimed when you file your yearly tax returns with the IRS. If you don’t wait to wait until then, another option is to lower your federal income tax withholdings on your W-4 through your employer. That way you will receive the benefit sooner on a monthly basis.
Given that the rules governing the mortgage credit certificate program vary from state to state, qualifying for an MCC depends on a few key factors. These include where you live, your earnings, the purchase price of your desired property and the size of your household.
Other factors include:
The tax credit is meant to make monthly mortgage payments more affordable for as long as the property remains your primary residence by offsetting what you pay in interest.
The dollar-for-dollar tax credit lessens the burden of meeting loan repayments. In some situations, an MCC is necessary for you to qualify for a loan that you would not be eligible for otherwise—by bringing down your net monthly mortgage payment.
Unlike programs that help with mortgage down payments or closing costs, MCCs do not impose limitations on the types of mortgage financing they can be paired with.
Borrowers can get up to a $2,000 tax credit each year. The exact amount of the tax credit is based on a formula that takes into account the mortgage loan, the mortgage rate and the MCC percentage. The percentage depends on the amount of the original mortgage loan.
The following are ways the tax credit is applied, depending on the state.
As will all things when it comes to buying a house, it is important to explore the costs and risks in applying for an MCC. This will help you decide if the benefits make it worth your while.
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ContributorBrai is the founder of SW4 Insights, a public policy advisory firm based in Washington D.C. He has over a decade of experience as a journalist and consultant covering finance and economic policy, with a particular focus on distilling complex topics to inform readers' decision-making.
Correspondent/EditorRachel Witkowski is an award-winning journalist whose 20-year career spans a wide range of topics in finance, government regulation and congressional reporting. Ms. Witkowski has spent the last decade in Washington, D.C., reporting for publications including The Wall Street Journal, American Banker and Bankrate. Ms. Witkowski's deep knowledge of government and policy aided a series of investigative stories that triggered congressional hearings on employee claims of discrimination at a federal agency and how indirect auto lenders were being reviewed by regulators.
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