When you’re buying a house, the financial aspect of it is often the most stressful. Fortunately, there are some ways you can get a break or some help in order to ease your finances and still get into your home. That’s especially important for lower income buyers, as they may be so close to qualifying for a house but not quite have what they need. Missing their dream of home ownership by only a little can be frustrating, and a mortgage credit certificate may be what they need to get qualified for a house. But what is a mortgage credit certificate? It’s a credit that can allow them to show a little bit larger income, so they can qualify for a home and get out of renting.
1). What does a mortgage credit certificate provide?
For some people, buying a house is a dream they feel they won’t ever attain. Often that comes from simply not having the income they need to get a mortgage. Even if they can save up the down payment and they have good credit, their income must be enough to make the mortgage payments. The mortgage credit certificate (MCC) provides a way that buyers can legitimately show a higher level of income, so they have the opportunity to get a mortgage. States and other governments offer this credit, so you may have some options in your area that wouldn’t be available in others. Be sure to ask around with your lender and with any agencies that help with housing or lower income needs, so you can get the best information for your area.
2). How does it help?
By allowing a buyer to count the amount they would pay in mortgage interest as income, the income level that buyer can show for their mortgage application goes up. While it’s not a huge amount, it can be enough to push a buyer over the threshold of getting a mortgage. With the MCC, lower income borrowers who don’t want to keep renting have choices, and that can mean a better life for people who really want to own their own homes. This credit is designed for people with lower incomes who are buying modest homes, and not for people who are looking for expensive homes or who want to buy a second home. Your income, assets, and other factors will be checked out thoroughly when you apply, just as they would for a mortgage without the MCC.
3). How do you know if you qualify?
To qualify you have to have a low income, but there are other factors. For example, you have to be purchasing a home that you’re going to live in, and can’t be buying a second home, a vacation property, or a house that you’re going to use as an investment and rent to other people. You also need to be buying your first home. If you’ve owned before, you generally can’t qualify. However, there are some provisions for people who haven’t had any ownership interest in a home for the last three years. If you fall into that category, it’s worth checking to see if you could qualify for the credit. Even if you’re turned down, at least you’ll know. If you’ve owned a home in the last three years, though, you won’t be able to get the MCC, since it’s restricted to first-time buyers.
4). What can you buy with this credit?
As you’re purchasing a home, there are all kinds of things to think about. The location of the home is very important, and you’ll need to make sure it’s big enough and that it’s structurally sound. By checking into all of that, you’ll have a higher chance of getting a home you’re happy with. Still, if you have the MCC you have to follow its guidelines, as well. Homes have to fall within the rules and regulations of the program, but most modest homes will do that. The goal of having these regulations is to make sure that people aren’t abusing the credit or using it to buy things that are too expensive. Since you still have to qualify for the mortgage with the credit included in your income, you won’t have the opportunity to get into a home that’s priced above what would be acceptable for the program.
5). How much will it save you?
How much the credit saves you will vary depending on the prices of the house and other factors. The credit is the amount of the mortgage interest you’ll pay, so it will depend on the mortgage amount you have and the interest rate you get from your lender. By working with your lender on those things, you can see the value of the credit and the specific amount you’ll save from it. The most important part of the credit is not necessarily how much it saves you, but that it allows you to get into a home and out of your rental. To many buyers, that’s the real value of this credit, as they have the opportunity to own their own home and may not have been able to ever do so otherwise.
2 Point Highlight
The mortgage credit certificate (MCC) provides a way that buyers can legitimately show a higher level of income, so they have the opportunity to get a mortgage.
The most important part of the credit is not necessarily how much it saves you, but that it allows you to get into a home and out of your rental.
