The Mortgage Credit Certificate: How It Works
The Mortgage Credit Certificate, or MCC program, might be the most widely available mortgage assistance program in today’s marketplace yet it’s unfortunately perhaps the least used. Why is a program that helps more buyers qualify for a mortgage widely available but relatively unknown? Probably because most loan officers don’t understand how it works and they shy away from this important program and instead try to lure the borrowers into some other type of grant. But there’s nothing like the MCC. MCCs are only available through approved lenders.
What is the Mortgage Credit Certificate (MCC)
In California, the California Housing Finance Agency, or CalHFA, works with local counties to oversee the program and increase the visibility of the MCC program. The MCC however is a federal program that is administered by local mortgage companies and is different than say a county supervised housing grant but instead is a tax credit. In essence, mortgage interest is changed into a federal income tax credit. The way it benefits the borrowers is by “boosting” gross monthly income in the amount of the allowable credit. The mortgage credit certificate can be used with almost any existing home loan program including an FHA loan, VA, USDA and conventional loans underwritten to Fannie Mae or Freddie Mac guidelines.
How it Works
The Mortgage Credit Certificate is designed to help eligible borrowers qualify for a home loan but there are some requirements that must be met. The primary qualification is whether or not the applicants have ever owned a home before and must be declared a “first time home buyer.” This means that any borrower on the application cannot have owned a home in the previous three years. Technically that also means someone could have owned a home four or more years ago can still qualify for the MCC program. One exception to this rule is whether or not the subject property is located within what is known as a federally Designated Target Area.
The MCC can only be used to finance a primary residence and cannot be used to help qualify for a rental property, a second home or a vacation home. Next, there are income limitations for the household. To be eligible, total household income cannot exceed certain levels and these levels can vary county by county. There are limits on the sales price of the home, as well. However, if the home located in a Designated Target Area, both the income and sales price limits are raised. The home can be a single-family residence, a condominium unit or a townhome as well as a detached property located in a planned unit development, or PUD.
Find out if You Qualify
If you’re wondering whether or not a specific property or neighborhood is indeed located in one of the Designated Target Areas, work with me, I can find out that information for you. I can help locate areas for you and walk you through the process.