We received a ton of emails from our realtors this past week on how the MCC First Time Buyer Tax Credit Program Works. Many buyers are looking for that extra benefit to purchase, aside from interest rates at record low 4% range. MCC is a program offered through the Washington State Housing Finance Commission (WSHFC). Individual loan officers must be licensed to offer the program, and many haven’t taken the required courses because the loans do require a little more work.
Many of you are aware of WSHFC (nick named State Bond) which offer an assortment of down payment assistance to first time buyers. The MCC program stands for Mortgage Credit Certificate. It gives the buyer a DIRECT TAX credit of 20% of the interest they paid on their mortgage toward a credit of what they owe the IRS.
Example:
Let’s say they finance $200,000 at 4.25%. That’s a standard deduction of $9000 of interest paid for the year on schedule A of the tax return.
Under this MCC program the borrower gets 20% of that $9000 as a tax credit ($1800). This would, of course, be a direct credit against their tax bill. The remaining 80% of the interest deduction/payment goes on the Schedule A.
The true benefit to the borrower: The tax credit is a more direct dollar benefit than a tax deduction reducing a borrower’s taxable income.
Here are the basic details:
€ Must be a first time buyer (if they haven’t owned a home in the past three years they are considered a first time buyer.) If they buy in a ‘targeted area” – as outlined by State Bond - they can also not be qualified as a first time home buyer.
€ Max Sales Price of $475 King and $395K in Pierce County
€ Income Limits based on household size: $97K for 3 people in King, $90K for 3 people in Pierce
€ State Bond will charge the buyer a $695 non-refundable fee on their HUD 1 to originate loan
€ Program can be used with Conventional, FHA, VA
****YOU CAN NOT use the MCC program with the State Bond Down Payment Assist Program. Buyer must have their own funds for down.
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