Credit program boosts first-time buyers

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— People who qualify for a mortgage credit certificate are missing a huge opportunity if they don't take advantage of it, said Jeff Chapman of Homebuyers Mortgage and the Regional Affordable Living Foundation.

The MCC program, administered by the Colorado Housing and Financing Authority, offers eligible Colorado homebuyers the ability to save thousands of dollars in federal income taxes to help pay monthly mortgage payments. It is available for Eagle, Routt, Grand, Summit and San Miguel counties.

"The MCC program has proven to be a successful tool in helping low- and moderate-income Colorado families become first-time home buyers," said Karen Harkin, director of CHFA's Home Finance Division. "The MCC program is particularly effective in Routt County, where the cost of housing is high and incomes are often insufficient to qualify for a home loan."

The certificates authorize low- to moderate-income families to claim up to 20 percent, dollar for dollar, of mortgage interest paid as a federal income tax credit. And to be consistent with regular income tax returns that offer write-offs for mortgage interest, the other 80 percent also can be written off.

After closing on a home, the borrower receives the MCC, which must be kept and turned in each year with income tax returns to the Internal Revenue Service to claim the benefit.

The Routt County MCC Program provides the following example: A borrower gets a $100,000 loan through the program at 6.875 percent interest. Leaving out the complexities of an amortization, estimated interest for the first year would be $6,875. Twenty percent of that amount, $1,375 -- or $114 per month -- is eligible for a tax credit through the MCC program. The remaining 80 percent, $5,500, would be the borrower's normal mortgage-interest deduction. Over the span of a mortgage, the credits can add up considerably. The benefit continues until the buyer either sells the property or refinances.

"Overall, it enhances your federal income tax benefits when you buy, by enhancing the money you get back," Chapman said. "It's one of the best money-savers there is out there."

To qualify for the program in Routt County, homebuyers must have an income of $54,900 or less for a one- to two-person household and $63,135 for a household of three or more residents. Also, the purchase price limit for an existing home is $215,100 and $343,800 for a new home. The benefits are available for people who have not owned a house in at least three years.

Participating lenders can use MCC benefits to help borrowers qualify for a mortgage they may not qualify for without an MCC, said Ellen Hoj of RALF.

Routt County has $2.5 million available in its MCC program, and more money is coming, Chapman said.

"It's supply-and-demand type funding, so the more people that use it the better," Chapman said. "This is an awesome program. (With an MCC), if you're struggling to a make higher monthly payment, you can relax, because the tax return will make it like a regular payment. It's like taking a loan down two whole points.

"This is a financing tool to bridge the gap between higher priced homes and lower income levels."

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