Mortgage Credit Certificate - Additional Tax Credit Savings

Mortgage Credit Certificate Highlights

The MCC Program was authorized by Congress in the 1984 Tax Reform Act as a means of providing housing assistance to low- and moderate-income homebuyers. The feasibility of the MCC Program and the degree to which it can provide housing assistance is totally dependent upon the extent to which homebuyers have federal tax liability which can be offset by the MCC tax credit. Typically, higher income homebuyers with few deductions or credits are generally the best able to use the MCC tax credit as a form of housing assistance.

A qualified homebuyer using the MCC is able to claim up to 20% of annual mortgage interest paid as a federal income tax credit. The remaining mortgage interest (80%) continues to qualify as an itemized deduction. As an example, on a $200,000 mortgage with a 6% interest rate the homebuyer will pay $12,000 in interest the first year. Twenty percent of this amount, or $2,400, can be used to directly reduce the homebuyer's federal income tax liability. The MCC Program provides a dollar-for-dollar reduction of federal income taxes. Unused credit can be carried forward up to three years and the homebuyer can retain the federal tax credit for the life of the loan so long as the homebuyer continues to occupy the property as their principal residence.

The Commission may reissue the MCC when the holder of the certificate refinances the original mortgage loan so long as certain guidelines are met.

The MCC will be issued only with respect to a loan made in compliance with the federal eligibility requirements as may be found below and in the relevant sections of the House Key State Bond Program Manual.

FIRST-TIME HOMEBUYER REQUIREMENT

The MCC Borrower(s) must be a First-Time Homebuyer unless the Single-Family Residence is located within a Targeted Area (see "ELIGIBLE PROPERTIES" below). A First-Time Homebuyer is defined as someone who has not owned and occupied a primary residence at any time in the three years preceding the closing of the Mortgage Loan.

Applicants may qualify if they owned other property such as vacation property, a recreational vehicle, a mobile home (not affixed to real property and for which they paid no property tax or claimed a mortgage interest deduction), or if they inherited property in which they did not reside.

The primary form of documentation is the federal income tax returns for the last three years submitted by the Applicant at loan application. The Participant Lender must examine the returns to determine that no mortgage interest or real estate tax deductions were taken.

MAXIMUM ANNUAL HOUSEHOLD INCOME LIMITS

MAXIMUM ACQUISITION COST LIMITS

Acquisition cost limits of a Single-Family Residence must not exceed the following:

King/San Juan
Non Targeted Area - $450,000
Targeted Area - $475,000

ELIGIBLE PROPERTIES

Eligible properties are new or previously occupied single family residential dwelling units located in a Washington State, including stock held by a tenant shareholder in a cooperative housing corporation, manufactured housing, and homes located on Native American trust land.

Eligible properties may be located in both Targeted Areas and non-Targeted Areas. A Targeted Area is defined as either a census tract in which 70% or more of the households have an income which is 80% or less of the statewide median family income, or an area designated as an area of chronic economic distress. (See also Section 4 "Property Requirements" of the House Key State Bond Program Manual to see if the property is in a Targeted Area.). Note: Not all counties have Targeted Areas.

If the property is a manufactured home, it must have a minimum of 400 square feet of living space and a minimum width in excess of 102 inches and which is of a kind customarily used at a fixed location.

*Please refer to the House Key State Bond Program Manual for additional requirements. This can be found at http://www.wshfc.org/sf/mcc/MCC.html.

For more inforamtion on the Mortgage Credit Certificate program, or to have an agent assist you with your search, please contact us at (425) 396-4569