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The Mortgage Credit Certificate (MCC)

The Mortgage Credit Certificate (MCC) is a tool to provide housing assistance to low and moderate-income families. The MCC operates as a federal income tax credit for an eligible borrower. It reduces the borrower's federal income taxes and, in effect, creates additional income for the borrower to use in making a monthly mortgage payment. The annual amount of the Federal tax credit is 20% of the annual interest paid or accrued on the mortgage loan for the residence.

Example:
            

$200,000
    Loan amount   

x 6%
    Interest rate                  

$12,000
    Interest paid 1st year

x 20%
    MCC credit rate

$2,400
    Tax credit per year
 

The amount of the federal tax credit that can be claimed each year cannot exceed the borrower's annual income tax liability after all other credits and deductions. The itemized deduction for mortgage interest will be reduced by the amount of the tax credit. Unused tax credits under the program can generally be carried forward three years for federal tax purposes. The benefits of the MCC are available for the life of the original mortgage as long as the borrower occupies the property as their primary residence.

The MCC recipient must be a first-time homebuyer and plan to occupy the property as their primary residence. Prior ownership of a home within the last three years disqualifies the applicant as a first-time homebuyer unless the property is located in a target (census tract) area. There are census tracts located in Apache, Cochise, Coconino, Gila, Graham, LaPaz, Mohave, Navajo, Santa Cruz and Yuma counties where buyers are not required to be first-time homebuyers, and income and sales price limits are higher.

MCCs can be used with fixed-rate or adjustable rate FHA, VA, and Conventional loans, but an MCC cannot be issued to a borrower who is refinancing an existing mortgage. An MCC cannot be combined with the MRB program nor used with 100% seller financing. There is a program fee of 1% of the first mortgage amount as a one-time administration charge, payable at the time of loan closing.

Mortgage Revenue Bond (MRB) Home Loans for First Time Buyers

The Mortgage Revenue Bond Program provides an attractive 30-year fixed rate mortgage at below market rates for homebuyers who qualify for eligible FHA, VA, Fannie Mae, and Freddie Mac conventional loans.

The buyer must not have owned a home in the past three years and must qualify to borrow from a participating lender. The home, whether new or previously owned, must become their primary residence. An MRB loan can be combined with the ADOH Down Payment and Closing Cost Assistance program, but not with the MCC. Certain income and purchase price limits apply.