Tuesday, May 3, 2011

MCC requirements in Texas...

While purchasing a new home I discovered a few incentives that I thought, at first, I was eligible for. Therefore, for those of you who are now in the market, I'd like to show you a few things that may put a few bucks in your pocket or keep them there! 
Mortgage Credit Certificate, or better known as the MCC program...
"Allows the homebuyer to claim a tax credit for some portion of the mortgage interest paid per year. It is a dollar for dollar reduction against their federal tax liability."
The great thing about this is that while it doesn't save you money, it does extend your salary up to $166.66 per month or $2,000 per year! Who doesn't like having an extra 2 grand in their pocket?!?
So, who's eligible? That's the tricky part, the rules aren't too complicated, but they are strict and the household has to be in a low-income bracket to begin with:
  • The household has to meet income and home purchase requirements; 
    • For Texas, it can vary by place, but frequently what I've seen the complete household has to be 80% below the statewide median income or an area of chronic economic distress.
    • To find out what the median income is go to this website: 
      • http://www.ffiec.gov/geocode/
      • Enter the address and click on the "Get Census Demographic" on the bottom and you'll find the Median Income Family
  • Have not owned a home as primary residence in the past three (3) years;
  • Meet the qualifying requirements of the mortgage loan;
  • Will use the home as their principal/primary residence. 
    • Sadly, this wont work for those of you who wish to rent the home out. :-(
Some of the costs associated with this fee is a $75 non-refundable MCC Commitment Fee & 1% origination fee.

Granted that 1% origination fee could cost several thousand dollars, but keep in mind that this MCC credit is for the LIFE of the mortgage. In other words, it's possible that within the first year or two that you'll make that fee back and then the rest is free money from the government!  

Lastly, an important part of the MCC rate is that it varies by how much your home costs in Texas, so lets see what the limits are: 
  • 30% of the annual interest paid on mortgage loans under $115,000 
  • 25% of the annual interest paid on mortgage loans between $115,000 and $140,000
  • 20% of the annual interest paid on mortgage loans between 140,000 and $210,375

There is also a cap on the program so I highly recommend applying for it as soon as possible, so that you'll be able to receive the funding, because once it's out of funds, it's out!


Let's say you want to buy a home in the medical district of San Antonio, TX.
1. I googled apartments near the medical district of San Antonio, and found the Villas of Oak Creste. 5315 Fredericksburg Rd 78229
2.  I went to http://www.ffiec.gov/geocode/ and typed in an address 5315 Fredericksburg Rd 78229 and found the MSD, Tract code, and most importantly, their demographic data:

3. I took their 2010 Est. Tract Median Family Income: $57,627 * 0.80 = $46,101.60 so everyone who lives under your new roof would have to have a combined income of less than $46,101.60 per year.
Therefore, lets say you and your wife combined make $45k, great, you've never owned a home and you're preapproved for an FHA loan. Great! You'll probably qualify for this credit!

Now how much will you get from this credit?
Lets say your mortgage is $140,000.00 with an interest rate of 4.75% (you after all have an amazing Credit Score right?), with 25% from the MCC Credit, you'll probably have an additional $1,662.50 yearly added to your salary or $138.54 per month!
Mortgage Amount:
Interest Rate:
Total Interest Paid First year:
$ 6,650.00
Mortgage Credit Certificate Rate:
X .25
Tax Credit Amount:
$2,000 (max)

The major disadvantage to this program is that it counts everyone's income. My wife who isn't even a citizen, currently working as a student on an F1 visa, her stipend counted placing us just a couple of thousand dollars over the income required. I was disappointed. 

Readers, have any of you applied for the MCC? Received it? Tell me about your experience with the MCC, I'd be glad to hear about it!

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