First-time home buyers can take the money and run in Money-Saving
Mortgage Fact # 2.
Tax Credit Helps First-Time Home Buyers
If you're in the market for your first home, remember: the federal
government goes out of its way to help you. Apart from the HUD
and VA loan programs, the Mortgage Credit Certificate is yet
another "benny" to help lower the financial hurdles involved in
buying your first home, according to the Journal Newspapers.
The MCC, issued by the Housing Finance and Development Corp,
offers a way of reducing your federal tax burden which, in turn,
makes more of your income available for monthly mortgage
payments. Any upward tweaks of your income allow you to qualify
for a proportionately higher mortgage--and a bigger or better first
But you must meet certain requirements to qualify, including
falling under specific income guidelines, being a first-time home
buyer, and obtaining the loan and new home as a principal
If you do qualify, you'll reap some significant tax benefits.
The MCC allows you to take a federal tax credit of 15 percent on
your annual mortgage interest expense. For example, a 30-year
fixed-rate mortgage of $85,000 at 8 percent interest would
require $6,774 in interest payments during the loan's first year.
With the 15 percent tax credit, you would save $1,016, a monthly
savings of $85. Plus you would still be able to deduct the
remaining 85 percent if you itemize deductions.
Generally, the program allows for a maximum refund of about
$1,200 per year. Once you qualify, you'll have a choice of
either: a) lowering the taxes withheld from your paycheck, or b)
taking the credit at the end of the year. If you sell your home
within three years, or if you ever sell your home at a gain, you
must repay the tax savings. Repay Uncle Sam if your income rises
above a certain level, too.