Archive for February 12, 2014

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 4.25%, and are in a 20% tax bracket.

Year #1…Total interest paid = $11,387
Annual property taxes = $2,750
Mortgage insurance paid = $3,619
Total paid in = $17,756

Annual tax savings = $3,551.20 or $295.93 per month

Annual refund with MCC = $5,372.80 or $447.73 per month

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.


First Time Home Buyer Market in Seattle

How’s the first time home buyer market doing in Seattle?  Competition is still STIFF.  Low inventory levels are still leading to multiple offer situations and even some bidding wars.  Months of inventory (essentially supply vs. demand) is at about 1 month for entry level housing in North Seattle.  Many other first time home buyer demographics are seeing similar trends, which means its a seller’s market in many places around the Greater Seattle area.

So when will it get better for first time home buyers?  In When Will We See More Listings?, we described a potential timeline for more listings coming on the market in the near future.  We’re still speculating that this may come to fruition in late spring/early summer of this year.  If this is the case, first time home buyers should have more to choose from in the next 4-6 months or so.

So should first time home buyers wait until there are more choices? 
In our past blog we also described some pros/cons for waiting.  There are numerous variables to consider such as appreciation levels, interest rates, life circumstances, etc.  It really just depends on your specific situation, so you should gather information based on YOUR goals, not necessarily what the media is covering in general.

Don’t make the biggest decision of your life without getting educated! 
If you’d like to learn more about first time home buyer inventory levels in your specific area, or about the home buying process in general, please go to our Calendar/Reservations page and sign up for one our FREE First Time Home Buyer workshops.