Getting a mortgage credit certificate (MCC) can give you an advantage when it comes to buying a house. You may be able to purchase a more expensive house than you expected. You also may be able to qualify for a home when you couldn’t before. That’s because a mortgage credit certificate works by letting buyers count part of the money they would pay for mortgage interest as income. That raises their overall income for qualification purposes, and can help them get into a modest home. Still, there are a lot of myths surrounding the MCC, and it’s important to understand those myths in order to make sure that you’re not getting caught up in them. Then you can make an informed decision on whether to apply for the credit.
1). Can you buy a mansion?
With the MCC, the amount you spend on a house matters, and you can’t just buy anything you like regardless of price. Just like buying without the credit, you’re limited to a home that is priced in a range you can afford. There are purchase price restrictions when you’re buying a house with a Mortgage Credit Certificate. Before you fall in love with a house and then find out you can’t afford to buy it, talk to your lender and your local or state government about the requirements for buying a house with the credit. The more you learn about the credit, and the more you know about the price of the house you can purchase with it, the easier it will be for you to choose a home that’s going to work for your needs and that you can afford without so much stress.
2). What if your income goes up?
If your income goes up, that could affect the amount of the credit you’re getting. As long as your income stays the same or less than what you already have, you won’t have to worry about losing out on the credit, though. If you have a substantial raise in your income, like you might see if you change companies or careers, you’ll want to be up front about that. Getting a credit based on income means being responsible, and letting your lender know if there has been a change. You don’t want to get (or keep) the credit fraudulently, because that could result in you facing penalties and potentially being forced to repay some or all of the credit. By letting the required authorities know about any income change, you’ll get information on whether you’ll still qualify for the MCC.
3). Can you purchase anywhere?
You may not be able to buy a home just anywhere with the MCC. Not every local or state government offers the same options for the credit, and the qualifications in some areas may be different. With that in mind, it’s very important that you talk to your local or state authorities, and to lenders in your area, to see what kinds of options you have for getting or using the credit. If you do have it in your area, you’ll want to read and understand the guidelines, and find a lender who’s willing to work with you. Getting a lender who is used to writing loans with the MCC is also a good idea, since you want someone who has knowledge of the process and can help guide you through it from beginning to end.
4). What if you just sold your last home?
If you just sold the home you lived in, you’re not going to be able to qualify for the MCC. It’s generally supposed to be for first-time homebuyers, and it also extends to people who haven’t had any ownership interest in a home in the last three years. If you’ve owned a home before, but you sold it and the closing date was more than three years ago, you could still get the MCC. You will need to meet the other guidelines, as well, but you won’t be completely shut out of the process for having owned a home in the past. However, if the closing on the home you previously owned and sold was fewer than three years ago, you won’t be eligible for the credit and will need to wait until that three-year mark if you want to try to use the MCC to help you buy a new home.
5). Do you really have to live there?
No matter how much you pay to buy your house, you have to live in it in order to get the credit. You can’t use it for an investment property, a second home, a vacation home, or anything else that’s not your full-time residence. The MCC isn’t designed for any of that. Its primary goal is to be sure that anyone who wants to own a home and is close to qualifying based on income has the opportunity to use the credit to raise their income over the limit for qualification. By doing that, more people are able to get into their own homes, instead of continuing to rent. That can be a great way to help you and many others find a modest home, get qualified, and get moved in.
If you’re unsure about any of the requirements of the MCC, there are lenders and government agencies that can help you determine whether you’ll qualify. They can also help you decide if the price and type of house you’d like to purchase will be acceptable for the credit, so you’ll know how to proceed. Dispelling the myths surrounding the MCC could help you get into a great new home.
