what is a mortgage credit certificate

What Is a Mortgage Credit Certificate? 

Buying a home is an investment. The initial down payment plus closing costs often present substantial challenges for first-time homebuyers. 

As a result, several programs exist to enhance homeownership prospects for Americans, especially those in the low- to moderate-income bracket.  

One such program, the mortgage credit certificate, lowers the barrier to entry for those planning to purchase a home for the first time. But what is a mortgage credit certificate? As the best mortgage lender in Tucson, Arizona, Altitude Home Loans explains what you need to know about MCCs if you’re ready to buy a home. 

Mortgage Credit Certificate Described 

Mortgage credit certificates are certificates that mortgage lenders issue to qualifying first-time homebuyers. An MCC allows you to offset a percentage of your mortgage interest via a tax credit. To qualify for the MCC program, you must have a low to moderate income. 

An MCC may also help you qualify for a higher mortgage loan by increasing the monthly income that you can list on your application. You can use the credit to assist you in making monthly payments as long as the home remains your primary residence. 

An MCC is not a loan but rather a federal tax credit. Participating lenders provide information to their clients about the tax credit and apply to the State Housing Finance Agency for the certificate on their behalf. 

How MCCs Work 

What is a mortgage credit certificate? Unlike tax deductions, MCCs provide a dollar-for-dollar tax credit to qualifying recipients to increase their ability to afford housing payments. 

Sometimes, an MCC may help a borrower who might not otherwise qualify for a loan by reducing their net monthly mortgage payment. Qualifying home buyers who receive MCCs can then take a nonrefundable federal tax credit equal to a percentage of their annual mortgage interest. 

You may opt to take the tax credit when filing your tax returns or amend your W-4 withholding form to reduce the amount of federal income tax withheld from your paychecks. 

Tax credit percentages vary between states but typically range from about 10% to 50% of the total mortgage interest (up to a maximum of $2,000 for each MCC recipient). You may also deduct the remaining interest obligation as a standard home mortgage interest deduction. 

Benefits of MCCs

Mortgage credit certificates offer advantages like:

  • MCCs increase a borrower’s payment affordability. 
  • MCCs help lenders reach and qualify more borrowers with low-to-moderate incomes
  • Borrowers can couple MCCs with most first mortgage loans 

Potential Challenges of MCCs 

Mortgage credit certificates come with some potential downsides for borrowers:

  • The application, benefits, and limitations of MCCs can be difficult to understand.
  • Borrowers may be subject to recapture tax. 
  • State MCC programs depend on the availability of funds allocated to mortgage credit certificates.

Learn About the Mortgage Application Process With Altitude Home Loans

A tax or mortgage expert can ensure you properly take advantage of the MCC program and maximize your tax deductibility. 

Call our Altitude Home Loans home-buying experts at (520) 500-1010 to learn the truth about mortgage loans or for answers to questions like, “What is a mortgage credit certificate?”


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