With all of the creative financing options of the past several years' one option that has been forgotten is the good old-fashioned Mortgage Credit Certificate (MCC). In the early to mid 90's the MCC was a popular tool for many first time homebuyers. Here are answers to some common questions about the MCC program.

What is an MCC?
An MCC is a dollar for dollar tax credit on a borrower's federal tax return. This credit is used to offset a tax liability.

Who is eligible?
MCC's are generally limited to First Time Homebuyers. Some State/Local Housing Financing agencies allow buyers in targeted area's to be non-first time buyers. Generally MCC's are limited to low to moderate-income borrowers. Income limits vary according to the geographic location of the property.

Who issues the MCC Credits?
MCC's are generally issued by State Housing Finance Agencies and in some cases Local Housing Finance Agencies can also issue an MCC Credit Certificate.

How much is the credit and how is it calculated?
An MCC credit is equal to a minimum of 10% of the interest paid by a borrower during the year and can be as high as 50% of the interest paid for some borrowers.

How will it help me?
If a borrower pays $5,000 a year in interest and has a 20% MCC credit, that credit amounts to an extra $1,000 for the borrower over the year. That equals an extra $83.33 per month in the borrowers pocket and can mean as much as an extra $5k to $10k in buying power for a homebuyer. In addition for borrowers with higher debt ratios the MCC credit may help them qualify.

Can I use this to increase the amount of my tax refund?
NO! This is a tax credit that means in order to get the full benefit of the credit you must have a tax liability at the end of the year. This liability is "washed" away by the tax credit. Most borrowers create a tax liability by changing their withholdings out of their paycheck. That means more money in every check with no tax liability at the end of the year. This makes that dream house much more affordable!