Tax Credit Not Expired Yet!

Missed on the federal first-time homebuyer tax credit? Not to worry! Here’s, a replacement. Maybe even better.

I was not the only realtor at Keller Williams Marysville team meeting today who was surprised by the Guild Mortgage presentation on MCC (Mortgage Credit Certificate). It turns out this little known tax credit has been available to first time home buyers in WA since 1984!

Here’s a few caveats that I’ve noted.

1. This is a tax credit (work dollar for dollar on your taxes), not a deduction (the credit doesn’t take away the mortgage interest deduction, however). Homebuyer will receive 20% of the interest paid on their mortgage in a credit over the life of the loan. This credit is not refundable, which means if because of low income you owe $0 to Uncle Sam, the credit will be worthless to you. You should consult your tax guy before applying.

2. If you compare this to the $8000 credit that was offered, over the long-term the MCC seems like a better option. Isn’t that good news?

3. There are income and house cost limits. In Snohomish county the home price can’t exceed 370k, and home buyer’s income should be below 90K (1-2 person family)

4. Home buyers must take a 5 hour home buying class (available free of charge)

5. There’s a $650 one time fee at the closing.

6. It works with any type of loan: conventional, FHA, VA, USDA (Wow!)

7. The credit can be taken into account during underwriting. It can help home buyer qualify for a potentially higher loan!

Here’s a sample tax benefits calculation on a $200,000 loan at 5% interest: (As the loan amortizes, you are going to pay more principal and less interest, so each following year your credit savings will decrease)

1st Year $9864 20% = $1,972
5th Year $9204 20% = $1,840
10th Year $8148 20% = $1,629
Total credit for the first 5 years would be $9,537.00
Total credit for the first 10 years would be $18,126.00

More details available at http://www.wshfc.org/buyers/MCCprogram.htm

Serhiy Onyshchuk, Snohomish County Realtor, Keller Williams Marysville