Mortgage Credit Certificate (MCC) Program

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

MCC Update: Received new allocation July 2008

The Mortgage Credit Certificate (MCC) 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.

MCC eligibility requirements are as follows:

• buyer must not have owned a "principal residence" within the past three years.
• purchase of unit must be for occupancy by owner (not for rental of investment).
• Income & Other Program Limits

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

For Example:
You obtain a mortgage loan of $120,650 for your new home from your 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, you would receive a Federal income tax credit of $2,528 (20 percent of $12,640). If your annual Federal income tax is $2,528 or more after all other credits and deductions have been subtracted, you would receive all the benefit of the MCC. You would file a revised W-4 withholding form, and your Federal taxes would be reduced by $211 per month (2,528 divided by 12). The dollars saved in Federal taxes can go toward your monthly mortgage payment.

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

WHERE CAN I GET A MORTGAGE CREDIT CERTIFICATE?

You may obtain a mortgage credit certificate through any of the participating Lenders. A list of the Lenders is available from the Housing Authority.

HOW DO I 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. 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.

WHAT ARE THE 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.

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.

WHAT KINDS OF PROPERTIES ARE ELIGIBLE?

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.

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. 214.

PARTICIPATING LENDERS: Updated Lender List

Notice to Lenders: Announcement of New MCC Allocations- July 2008

The MCC Program is authorized by Congress and governed by the Internal Revenue Code Sections 25 and 143.

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. 214.

Si desea una traducción en español, por favor llame al (831) 454-9455.

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