Mortgage Credit Certificates Boost 1st Time Buyers Ability to Buy a Home

If you're a 1st-time buyer and you've been looking at buying a home in the Lexington, KY area, you may already be familiar with the $8,000 1st-time buyer tax credit from Uncle Sam. What you may not have heard about, however, is another program that can bring you even more money back on your tax return (or possibly enable you to afford more house).

It's called a Mortgage Credit Certificate program and it's administered through Kentucky Housing Corporation. I used a mortgage credit certificate when i bought my first home 10 years ago and just this year they've reenacted the program to give 1st-time buyers even more incentive to get out there and snap up those bargain properties.

Here's how it works: a Mortgage Credit Certificate (MCC) allows you to convert 25% of your mortgage interest deduction to a non-refundable tax credit for a maximum amount of $2000 per year. What this mean is that normally, you would get a "deduction" for the interest you paid on your mortgage (an offset against income) but this program enables you to get 25% of the interest you pay back on a dollar-for-dollar basis until you reach a maximum of $2000.

Let's say, for example, you buy a home this year and your montly payment is $1,000. Now, the majority of a loan payment in the beginning of a loan goes towards interest, not principle. For simplicity's sake, let's just say $800 of that $1000 you're paying each month is interest on your loan. So, at the end of the year, you've paid a whopping $9600 in interest! With an MCC, you'd be entitled to get a rebate for 25% of that (for a maximum of $2000) so in this case, you'd get $2000 back in taxes (25% of $9600 is $2400, which is exceeds the maximum of $2000, so you'd just get the maximum of $2000). Isn't that great?

Now, the MCC is good for the life of the loan and can even be reissued should you refinance your loan. You have to meet certain income guidelines (they're not that strict) and you must be a 1st time buyer, but that's about it for qualifications. The program began on July 1, 2009 and will continue until their $25Million alotment of money runs out, so it should continue for most of this coming year (unless we get a huge influx of borrowers applying for them).

If you're curious about MCC's, please don't hesitate to email me or give me a call -- I'll be happy to help in any way i can!

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