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Mortgage Credit Certificate (MCC) Program  

MCC Allocation Status
How the MCC Program works
Eligibility Requirements
Where to Obtain a MCC
How to Apply
Application Fee
Loan Terms
How long does the MCC last?
Eligible Property Types
Recapture

RmCCs or Refinancing MCCs
Participating Lenders
Notice to Lenders
Additional Information

MCC Allocation Status

Allocations of MCCs are made by the State of California and are quickly used. Below is the current status of MCCs:

MCC status: Available

Allocation Letter

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How the MCC Program Works

The Mortgage Credit Certificate (MCC) Program is authorized by Congress and governed by the Internal Revenue Code Sections 25 and 143. The program provides tax credits to income eligible homebuyers in the following areas: the City of Capitola, the City of Santa Cruz, the City of Scotts Valley, the City of Watsonville, and the unincorporated areas of the County of Santa Cruz.

The Mortgage Credit Certificate (MCC) reduces the amount of Federal income tax you pay, thus giving you more available income to qualify and pay for a mortgage loan.

If eligible, an eligible buyer will receive a tax credit for 20 percent of the annual interest paid on the mortgage loan. The amount of the credit will not be more than the buyer’s annual Federal income tax liability, after all other credits and deductions have been taken into account. The buyer’s ability to take full advantage of the tax credit will depend on the buyer’s individual tax liability.

For Example:
The buyer obtains a mortgage loan of $120,650 from a
participating lender at an interest rate of 10.5 percent for 30 years. In the first year, the interest on this loan would amount to $12,640. With a 20 percent MCC, the buyer would receive a Federal income tax credit of $2,528 (20 percent of $12,640).

If the buyer’s annual Federal income tax is $2,528 or more after all other credits and deductions have been subtracted, the buyer would receive all the benefit of the MCC. The buyer would file a revised W-4 withholding form, and the buyer’s Federal taxes would be reduced by $211 per month (2,528 divided by 12). The dollars saved in Federal taxes can go toward the buyer’s monthly mortgage payment.

If the tax liability was under $2,528 - $800 for example – the Federal income tax would be reduced by $800.

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Eligibility requirements

  • Buyer must not have owned a "principal residence" within the past three years.

  • Purchase of the home must be for occupancy by owner (not for rental of investment).

  • The purchase price cannot exceed certain limits.
    See Allocation Letter.

  • Buyer income must not exceed certain limits.
    See
    MCC Program Limits.

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Where to Obtain a MCC

You may obtain a mortgage credit certificate through any of the participating Lenders. A list of current Participating Lenders is available here.

How to Apply

You may apply for the credit certificate through a participating Lender at the same time you make a formal application for a mortgage loan.

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Application Fee

There will be a non-refundable fee of $250.00 to make an application for an MCC. Lenders will work with borrowers on a first-come, first-served basis. After you have made a formal application, the Lender will arrange with the Housing Authority of the County of Santa Cruz to reserve funds for your MCC. This reservation will hold the MCC while your application is being processed by the Lender and the Housing Authority of the County of Santa Cruz.

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Loan Terms

The loan term depends on the Lender and the type of loan you use. Depending on the mortgage marketplace and your borrowing requirements, each Lender can set its own interest rate, length of mortgage term, down payment requirement, fees, points, closing costs, and other loan terms.

MCCs are available with conventional, fixed-rate loans; adjustable rate loans; FHA and VA loans, and privately insured loans. MCCs are not available with bond-backed loans (e.g. City and County Single Family Homeownership Programs, CHFA), which carry a below-market fixed interest rate, or with refinanced loans.

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How Long Does The MCC Last?

As long as the home remains your principal residence, the MCC will be in effect for the life of your mortgage. Each year, the credit certificate is calculated on the basis of 20 percent of the total interest you paid on your loan that year.

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Eligible Property Types

The MCC can only be used for owner-occupied single family residences (including condominiums and townhouses) within the eligible areas: the City of Capitola, the City of Santa Cruz, the City of Scotts Valley, the City of Watsonville, and the unincorporated areas of the County of Santa Cruz. You are responsible for finding your own home to purchase.

No listing of homes, real estate agents, or builders is maintained by the eligible areas or the Housing Authority of the County of Santa Cruz. The homebuyer is free to use the services of any real estate agent, builder or lender.

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Recapture

Loans closing after January 1, 1991 are subject to a "Recapture" in the form of additional Federal tax. If an MCC recipient sells the residence nine (9) years or less after closing, Federal taxes may increase as a result of the sale.

Additional information on the Mortgage Credit Certificate Program can be obtained from the Housing Authority of the County of Santa Cruz, 2931 Mission Street, Santa Cruz, CA 95060 tel. 831/454-9455 ext. 286.

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RMCCs or Refinancing MCCs

For information about RMCCS, or refinance MCCs, go here.

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Participating Lenders

Participating Lenders List

Notice to Lenders

Most recent MCC Allocations Announcement

Additional Information

Additional information on the Mortgage Credit Certificate Program can be obtained by calling the Housing Authority of the County of Santa Cruz at (831) 454-9455 ext. 286.
  

 

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