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Mortgage Credit Certificate Thoughts

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Established Member

Mortgage Credit Certificate Thoughts

I am curious. I was informed I needed 3 years tax returns because of the Mortgage Credit Certificate. I am trying to understand this. I had not heard of until now. I heard it could affect the amount of house loan? What if I prefer not to do this. I usually don't have tax liabililty with 2 dependents and one is in college. It is just me and my kids. I am not sure the restrictions and benefit would really outweight the cost?

9 REPLIES 9
Regular Contributor

Re: Mortgage Credit Certificate Thoughts

I don't see why this would affect the amount of home loan you can get. A Mortgage Credit Certitification is an IRS tax credit. You don't even get benefit from it until you file your taxes for the year. This program is intended for low income earners and you have to be below the income requirements. The 3 years tax returns is likely to make sure your income is below the requirements. If you qualify for it, I don't see any drawback really, you would simply get a 20% credit on your mortgage interest each year. I would ask them why this would affect the amount of the house loan, that part seems odd to me.

Message 2 of 10
Established Member

Re: Mortgage Credit Certificate Thoughts

I don't understand it either. I am waiting on my LO to call me and explain. I am really strapped on cash for closing and reserves so this seems questionable if it would benefit me. I am constantly finding out new things to learn and I feel like I am in the dark since I am a first time home buyer. My tax liability is usually only $300 a year after all the college expenses and such.

Message 3 of 10
Regular Contributor

Re: Mortgage Credit Certificate Thoughts

Hello,

  To further add, that program has purchase price restrictions, that is why it would limit the home amount. The income and purchase price limits are all based on county. So if your income and the home purchase price allow you to get into something you want, the program is definitely worth it. But if you're not able to get into the home you want because of these limits, then you would just need to skip it.

Message 4 of 10
Established Member

Re: Mortgage Credit Certificate Thoughts

so this won't keep me from purchasing a home? It is just a savings if I take it.

Message 5 of 10
Regular Contributor

Re: Mortgage Credit Certificate Thoughts

Oh no, this wouldn't prevent you at all. It's a program designed for low to moderate income earners. This is not a requirement in any way. If you go to the web and search for 'Mortgage Credit Certificate' you'll see a lot of sites describing what this is. I could see how the title might be scary but this is just a 'Credit' when you file incoming taxes.

 

Good Luck on your process!

Message 6 of 10
Established Member

Re: Mortgage Credit Certificate Thoughts

Thank you so much! It makes me feel better. I hopefully will be in that house soon!

Message 7 of 10
Established Contributor

Re: Mortgage Credit Certificate Thoughts

A Mortgage Credit Certificate is a tax credit of up to $2000 (30% of your mortgage interest can be converted to an income credit) that can also be counted as Income that in some instances can help one qualify for  higher mortgage loan when your DTI gets tight.

Not sure what it "costs" you to obtain one, but here in NC my Bank charges clients a fee of $450 to obtain one through the NC Housing Finance Agency.   Just because one isn't eligible for it now doesn't mean one shouldn't get one at all, but you certainly want to consult with your tax/financial advisor to be certain that whenever you are eligible to utilize it (once your kids fly the coop for example) that you're able to get the money out of it, etc, etc.

 

In my opinion, it's certainly lost it's luster over the past year now that the IRS Standard Deduction has increased from 2017.   

 

As a matter of fact, there are lesser chances that you'll be itemizing your tax return and taking a mortgage interest deduction anyway so I'll be shocked if this tax policy isn't changed/modified eventually anyway, but that's unrelated to the MCC so I apologize for going off topic......(sorry, I shouldn't be drinking this early in the day/week....)

__________________________________________________

Licensed NC Mortgage Loan Originator
Message 8 of 10
Established Member

Re: Mortgage Credit Certificate Thoughts

Thank you so much for the explanation. It helps me understand better. As far as the drinking, I sure could use some myself! This mortgage process is brutal especially on credit challenged past. lol

Message 9 of 10
New Member

Re: Mortgage Credit Certificate Thoughts

IIRC mine was a 1% fee for the MCC in texas when I got my house. Turns out they never submitted the paper work. I found out when I went to do my taxes. Oh well, got my money back though!

Message 10 of 10