Archive for October 9, 2012

What is the Mortgage Credit Certificate?

What is the Mortgage Credit Certificate?  The Mortgage Credit Certificate (MCC) is a dollar for dollar tax credit for first time home buyers.  The credit relates to the mortgage interest paid on a homeowner’s property over the life of their loan, as long as it remains owner occupied.

How does this differ from the standard interest deduction?  The first 20% of interest you pay on your mortgage will come back to you in a dollar for dollar tax credit.  The remaining 80% of interest paid will still be used to write down your income on your taxes as it normally does with owner occupied properties.

Can you give me an example?  Let’s pretend the Johnsons are first time home buyers and purchase their first home for $275,000.  We’ll also assume they will utilized FHA financing with a down payment of 3.5%, a fixed interest rate of 3.75%, and are in a 20% tax bracket.

Year #1…Total interest paid = $10,040.95
Annual property taxes = $2,750
Mortgage insurance paid = $3,375.24
Total paid in = $16,166.19
Annual tax savings = $3,233.24 or $269.44/mo

Annual refund with MCC = $5,819.83 or $484.99/mo

Does the MCC last for the life of my loan?  The MCC does last for the life of your loan as long as you’re occupying the property.  However, keep in mind that as time progresses, though your monthly mortgage payment may stay the same, more of your payment will go towards principle.  Therefore, your tax savings will slowly decrease because you are paying less and less interest every year.

The MCC sounds like a no brainer for first time home buyers!  The MCC is a fantastic program, but there are parameters you have to meet, as well as repercussions if you stop occupying the property.  Don’t make a decision without getting educated first!  If you’d like to learn more about the MCC go to our Calendar/Reservations page and sign up for our FREE First Time Home Buyer/Down Payment Assistance workshop.


Home Opportunity Down Payment Assistance

What is the best thing about Home Opportunity down payment assistance?  The interest rate!  The interest rates for Home Opportunity are approximately 1% lower than other 30 year fixed loan programs.  So if rates stay in the 3.5-4% range, this down payment assistance program would offer a rate around 2.5-3%.  This is PHENOMENAL!

Are these rates better than other down payment assistance programs?  Definitely.  Previous programs offered through Washington State were generally 1% HIGHER than “market” rates.  With Home Opportunity being 1% LOWER than “market” rate, this puts them close to 2% lower in interest rate than previous programs!  On a $250,000 purchase, this would save you about $270 a month!

How much down payment assistance can I qualify for?  With Home Opportunity, there are 6 different down payment assistance structures available.  Of those structures, there are down payment assistance options allowing for up to $45,000 of assistance for first time home buyers.

Do I have to pay the money back?  Yes.  As with most down payment assistance programs for first time home buyers, the funds would have to be paid back eventually.  In some cases the money would be paid back with a monthly payment over a ten year period.  In other cases the money would not need to be paid back until you no longer live in the home or you pay off your mortgage completely.

How do I know if I qualify for Home Opportunity?  If you would like to learn more about the program and the criteria you have to meet, please go to our Calendar/Reservations page and sign up for one of our FREE First Time Home Buyer workshops.  Upon completion of our workshop you will receive a certificate issued by Washington State good for two years, that will give you access to state programs if you meet other income limitations, etc.  Don’t miss out on this phenomenal opportunity!!!