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Texas Mortgage Credit Certificate Program*

Texas Mortgage Credit Certificates provides additional savings to Texas first time home buyers on their federal income taxes!

    Features
  • Dollar-for-dollar reduction on federal tax liability for as long as you owe on the mortgage loan and live in your first home.
  • Available to qualified first time home buyers from all professions
  • No minimum FICO (credit) score for Stand-alone MCC option (MCC Only option)
  • Available statewide through a network of participating lenders
  • Buyers can maximize their benefits when they combine a Texas Mortgage Credit Certificate with a My First Texas Home mortgage loan!
    Eligibility
  • First time homebuyer, veteran or a homebuyer who has not owned a home within the past three years
  • Income limits apply
  • Purchase price limits apply
  • Other requirements may apply

Read more about the program below or use the Lender Locator to find lenders in your area who are currently participating in the program. The list includes address and contact information.

What is a Mortgage Credit Certificate? A Mortgage Credit Certificate 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.
Note: The Mortgage Interest Credit (MCC) is a non-refundable tax credit, therefore, the Homebuyer MUST have tax liability in order to take advantage of the tax credit.

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Who is eligible to receive an MCC? The program is open to those individuals and families who:

  • meet income and home purchase requirements;
  • 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.

Note: The MCC may not be used in connection with the refinancing of an existing loan. Targeted Areas – first time homebuyer requirement is waived; increased income and purchase price limits.

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Veteran’s Exemption: The Veteran’s Exemption gives those who served a chance to save. As a military veteran you protected the American Dream. Now is your opportunity to live it. If you served in active duty and were honorably discharged as evidenced by Form DD-214, and you have not previously had a mortgage financed through a mortgage revenue bond program, you are exempt from the first time homebuyer requirement. You must still meet the applicable acquisition and purchase price limit requirements of a non-targeted area unless purchasing in a targeted area census tract.

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How much of a tax credit can be issued under the MCC program? The size of the annual tax credit will be 20% or 25% of the annual interest paid on the mortgage loan. The credit rate will be shown in the issued Mortgage Credit Certificate to the homebuyer.

The credit cannot be larger than the annual federal income tax liability, after all other credits and deductions have been taken into account. MCC credits in excess of the current year tax liability may, however, be carried forward for use in the subsequent three years.

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MCC Example: MCCs are issued directly to qualifying Applicants who are then able each year to take a tax credit equal to a specified percentage of the interest paid on their mortgage. When using the 25% credit rate, the maximum annual tax credit allowed is $2,000. When using the 20% credit rate, the $2,000 annual does not apply.

See example below for additional information to assist you in determining which option best benefits the borrower. (add below example)

TDHCA MCC Options

  • 25% MCC Credit
    (up to $2,000 annual credit)
  • 20% MCC Credit
    (no maximum annual credit)

If loan amount x mortgage rate x 20% is less than or equal to $2,000, choose the 25% MCC Credit Rate.

In some cases, the 20% MCC Credit may provide a greater benefit than the 25% MCC Credit, as it has no annual maximum credit amount. If loan amount x mortgage rate x 20% is greater than $2,000, calculate the tax credit eligible to be claimed in accordance with the example provided to determine the credit rate that best meets the borrower’s needs and circumstances.

Year 1 Example

LOAN AMOUNT

$150,000

$250,000

MCC Credit Rate

25%

20%

25%

20%

Mortgage Interest Rate

5.50%

5.50%

5.50%

5.50%

First Year Mortgage Interest

       8,200

          8,200

    13,666

    13,666

Calculated Tax Credit Amount

       2,050

       1,640

       3,416

       2,733

Maximum Tax Credit Allowed

       2,000

 No Limit

       2,000

 No Limit

Eligible Tax Credit

       2,000

       1,640

       2,000

       2,733

Mortgage Interest Deduction

       6,200

       6,560

    11,666

    10,933

 

Annual Eligible Tax Credit, First 10 Years

LOAN AMOUNT

$150,000

 $250,000

MCC Credit Rate

25%

20%

25%

20%

Year 1

       2,000

       1,640

       2,000

       2,733

Year 2

       2,000

       1,617

       2,000

       2,695

Year 3

       1,991

       1,615

       2,000

       2,692

Year 4

       1,959

       1,613

       2,000

       2,689

Year 5

       1,926

       1,611

       2,000

       2,685

Year 6

       1,890

       1,609

       2,000

       2,682

Year 7

       1,853

       1,607

       2,000

       2,679

Year 8

       1,813

       1,605

       2,000

       2,675

Year 9

       1,771

       1,603

       2,000

       2,672

Year 10

       1,727

       1,601

       2,000

       2,669

First 10 Years

    18,932

    16,123

    20,000

    26,871

Credit may be claimed until loan maturity.

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Texas MCC Program Criteria / Requirements: All mortgage loan types are eligible. The mortgage loan, available through a network of participating lenders, must be underwritten according to FHA, VA, USDA/RHS or conventional loan criteria and will be at prevailing market rates. New and existing single family homes, townhouses, condominiums and manufactured housing (with certain restrictions) are eligible properties. Purchase price and income limits, adjusted by household size apply. The homebuyer must also occupy the property as their principal residence.

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Tax Credit versus Tax Deduction: A mortgage interest deduction differs from a mortgage tax credit in a number of ways. For example, all homebuyers, regardless of income, may take a mortgage interest deduction, whereas mortgage tax credits are available only to holders of MCCs.

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Length of Benefit: Each year, the mortgage tax credit will be calculated using the total interest paid on the mortgage loan that year. The MCC will be in effect for the term of the mortgage loan, so long as the residence remains the principal residence. In order to maintain the MCC the homebuyer can adjust their withholdings on their W-4 form with their employer and must file IRS Form 8396 with their federal income tax return. The form can be obtained from the IRS web site at www.irs.gov.

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Targeted Areas: In accordance with program guidelines, the Texas Mortgage Credit Certificate Program has funds set aside for targeted area loans. A Targeted Area is a census tract in which 70% or more of the families have incomes that are 80% or less of the statewide median income or an area of chronic economic distress. Homebuyers purchasing properties located in Targeted Areas do not have to be a first time homebuyer and purchase price and income limits are generally higher. For a list of Targeted Area census tracts identified by county, please refer to the following list. Your lender or REALTOR® should be able to verify whether the property you are considering for purchase is located within a Targeted Area census tract. To find your census tract, use the GeoCoding tool at http://www.ffiec.gov/geocode/. Targeted Area Census Tracts by County (PDF)

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Homebuyer Education Requirement: Homebuyer must complete a pre-purchase homebuyer education course prior to loan closing. This requirement can be satisfied through: Texas Statewide Homebuyer Education Program – Homebuyers can complete an in-person/face-to-face course available through a certified homebuyer education provider - http://www.tdhca.state.tx.us/homeownership/fthb/docs/TSHEPProviders.pdf; HUD-approved, non-profit organization or government entity, or a HUD-approved online course (verify course approval with TDHCA prior to completion); OR “Becoming A Homeowner” - TDHCA’s FREE Online Homebuyer Education course available through Texas Homebuyer U - http://education.myfirsttexashome.com/. Certificate of Completion required.

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Other Costs/Fees: In addition to the regular closing costs associated with the loan, there is a MCC Issuance Fee of $500.00 due upon closing. Please check with lender for current applicable fees.

Loans made in this program are subject to recapture tax provisions, under federal law. Read more in the Understanding Recapture brochure (PDF).

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I was issued an MCC by TDHCA; can I refinance my mortgage loan? If TDHCA issued your MCC you will need to fill out the refinancing application.  Upon review of the information, TDHCA will reissue you a new certificate.  For more information click on the form Refinancing of MCC Loan Application.  Refinancing of MCC Loan Application (PDF).

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What happens if I lose or misplace my MCC? Please contact Dina Gonzalez at 512-475-3993 for a replacement certificate.  There is a $50.00 fee for this service.

 

   
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