In a nutshell, the MCC is a tax credit that returns 20% of a borrower’s mortgage interest payment. Buyers can either claim the tax credit when filing their taxes or adjust their paycheck withholding amount, which will allow them to increase their income every month by a few hundred dollars. By increasing their income, buyers can gain additional purchasing power (up to $20,000*) or tuck the money away if they so choose.

Example*:

Eligibility Guidelines:

• Borrowers must be a first-time home buyer (not owned a home in the previous three years) and complete a Washington State Housing Finance Commission homebuyer education class.
• Conventional, FHA, VA and Rural Development mortgages are eligible.
• Applicable towards the purchase of a single family home, townhome, condos or a permanently affixed manufactured home.
• The home must be a primary residence, so it’s not eligible for second homes or investment properties.
• Maximum income limits apply. For King & Snohomish counties it’s $90,000 for 1-2 persons and $97,000 for 3 + person family.
• The maximum purchase price varies by county. For King County, it’s $450,000 in non-targeted areas and $475,000 in targeted areas. Most of downtown, Belltown, Denny Triangle, South Lake Union, First Hill and South Seattle fall into the targeted area, thus eligible up to $475,000.
• No more than 15% of the residence may be used for business or trade purposes.
• If buyer sells the property within nine years, a recapture tax may apply.
• There is a non-refundable fee of $650. However, that can easily be recouped in a few months.

The Mortgage Credit Certificate program is available through select lenders in Washington State on a first-come, first-served basis. Most of the notable mortgage companies are participating. The MCC credit is available through all of our recommended lenders: Wells Fargo Home Mortgage, Metlife Home Loans, Guild Mortgage and Sterling Savings Bank.

If you’d like to know more about the Mortgage Credit Certificate, drop us a note and we’ll put you in contact with a mortgage specialist.

* Every buyer’s circumstance is different and this amount depends on several factors including loan limit, loan program and interest rate. This is provided for informational purposes, please consult with your mortgage professional for greater details about the Mortgage Credit Certificate.

Previously, the $8,000 first time home buyers tax credit was set to expire on November 30, 2009 but has now been extended, uninterrupted through April 30, 2010. A second credit of up to $6,500 has been added allowing existing homeowners to “move-up” and take advantage of the incentive.

EXTENDED: First-time buyers who have not owned a home in the past three years are eligible for up to an $8,000 tax credit.

• Tax credit does not require repayment.
• Credit is available to couples with gross income of less than $225,000 and individuals making less than $125,000. Previously, the limit was $75,000 for individuals and $150,000 for couples.
• Buyers must secure a binding contract by April 30, allowing 60 days to close. Previously, the sale had to closed by the expiration date, now the purchase must be under contract by the expiration date and closed by June 30, 2010.

EXPANDED: Qualified homeowners who have lived in their current home for at least five of the past eight years are eligible for up to a $6,500 tax credit to buy a home, effective as of November 7, 2009.

• Tax credit does not require repayment.
• Credit is available to couples with gross income of less than $225,000 and individuals making less than $125,000.
• Credit is limited to homes priced $800,000 or less.
• Buyers must secure a binding contract by April 30, allowing 60 days to close.

The National Association of Realtors put together this chart outlining the tax credit changes. To download the PDF file, click on the image:

For more information about the tax credit, please consult with your Realtor, loan officer and/or tax advisor.

Related references:
Federal Housing Tax Credit website (lots of info, FAQs)
IRS – First Time Homebuyer Tax Credit
NAR – Tax credit basics