First Time Home Buyer Program, Florida Mortgage Credit Certificate Program (MCC)

Learn how to get money back on your taxes year after year!

First Time Home Buyer Program

Florida has a first time home buyer program to help people who want to buy a home! If you haven’t owned in the past 3 years you are considered a first time home buyer. It’s the Florida Housing Mortgage Credit Certificate Program, or MCC for short. This program allows first time buyers in Florida to receive a tax credit each and every year they file taxes as long as they are still paying mortgage interest and still have a Federal tax liability. For the right person this program can be extremely valuable. There are income limits so its important to consider those, additionally if you have no or a small Federal tax liability the benefit can be small or unavailable but for the right person they can get $2,000 back each and every year they file taxes for many years to come.

How Much Would My MCC Tax Credit Be?

The credit you get depends on two things, how much mortgage interest you pay for the year and what your current federal tax liability is. You have to have at least a $2,000 federal tax liability to get the full amount because its a non refundable tax credit unlike a child care credit. That means you can’t get more than you would have paid in taxes without the credit. The way it works is 30% of your interest paid gets refunded as a credit up to $2,000. Lets say you have a $100,000 loan, for the first year you would have to have at least $5,198 in mortgage interest paid for year (with a rate hypothetical rate of 5.25%), 30% of that is $1,559.40, so that’s what your credit back would be. The credit percentage gets reduced on loans over $100,000 to 20%, and loans over $200,000 the crediting percentage is 10%. The reason for this is because you get this tax credit not just the first year after you purchase your home but year after year after year! The lower credit percentages ensures that first time buyer’s with lower loan amounts continue to get an equivalent benefit over the same time someone with a larger loan amount would.

Lets Do an Example

So you can understand the benefit of the first time home buyer program let’s do an example. Say you bought a house for $250,000 and you used the USDA rural development program so you didn’t need any money down. For this example lets say your interest rate was 5.25% on a 30 year mortgage (I’m not quoting rate in any way shape or form). Under the MCC tax certificate program 10% of your interest paid gets refunded back to you up to $2,000, that’s the cap. On a $250,000 the first year of interest would be a little under $12,995. So 10% of $12,995 is $1,299. You must maintain the home as your primary residence to continue to get that tax credit when you file. That’s the amazing thing though, you continue to get the credit year after year unless you refinance, sell the home, or it become an investment property or second home. It may shrink over time but there is still a benefit for many years to come.

Income Limits

The downside is that not everyone can qualify for the program because if your household makes too much then you can’t use it. The income limits are similar to USDA financing in both the limits and the fact that the state looks at the total income in the home. That means that if you have your grandma living with you and she receives social security, even though she is not going to be on the loan that income counts towards the total housing income limits. Income limits are posted below along with the links. If your income goes over the limit following the years after you purchased your home you also may not be eligible for the tax credit. Don’t let that dissuade you from using the program though. We are talking about free money, and quite a bit of it at that. If a member of the household is over 18 years old their income must be applied to the limit unless they are a full time student.

Do I Have To Be a First Time Home Buyer?

You do have to be a first time home buyer to use the program but remember that just means that you haven’t owned in 3 years. Its weird because you actually aren’t a first time home buyer but are considered one for the MCC program. The underwriter will want to see 3 years of tax returns not necessarily to calculate income for that third oldest year but to prove the buyer was not a home owner. There are exceptions to the first time home buyer rule, one is if you buy in what’s called a targeted area. A targeted area is a lower income area, 70% of the households have to have an income that is 80% lower than the statewide median household income. Buyers in these targeted areas can use the program even if they just owned a property. There are also certain veteran exceptions.

How Do I Check My Federal Tax Liability?

This one is pretty simple, you just have to find your way around your tax return. Its on line 39 of your 1040 tax return. It’s typically on the second page, this is your federal tax liability. If you see at least $2,000 on there you are good to go!  If its less it just means that if your taxes are the same next year than you won’t get the max back of $2,000.  What if its a $1,000 dollars? I say that’s good money and you might as well keep that in your pocket if its possible for you to do so.

What Kind of Mortgage Can I Use With MCC?

You can use the MCC first time home buyer program with any conforming mortgage, conventional FNMA or Freddie Mac financing, USDA $0 down financing, FHA financing, or VA financing. It can not however be used with any other first time home buying bond programs. It also needs to be a fixed rate mortgage. There are loan amount limits with the program as well and those are provided below. Typically the only way to reach the limit is if the borrower has an income close to the limit and has very little debt.

First Time Home Buyer Education Class Required!

Unless you are buying in a targeted area or have a veterans exceptions you must take a first time home buyers education class from a HUD approved counselor. The certification is good for 2 years from the time of completion, and it must be completed before your closing. Its easy to do online but face to face counseling can be done as well. Here is a link to the HUD website for Florida Counselors.

Save a Mortgage From Dying!

The MCC tax certificate program can save a deal from dying. How so you say? Well that tax credit you will get? It can be applied towards your debt ratios as income. There are times for whichever reason that a persons debt ratios might be higher than what they or their lender was thinking. If they qualify for the program the underwriter can credit them the monthly income that they will be receiving. If they are poised to get a $2,000 a year credit, then that means the underwriter can apply about $166 a month towards their income. This can save a deal! Attentions real estate agents, be aware of this program! The lender you use might not be an approved provider of the MCC program. Training must be done by the loan originator to offer the program. Here’s a link for more complete MCC First time home buyer guidelines.

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Keith Meredith

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