With the market making a rebound, buyers who had been on the fence are coming to the table to take advantage of favorable mortgage rates before they continue to rise. For those who have been having difficulty qualifying for a mortgage, it may be a good idea to try for a mortgage credit certificate.
A mortgage credit certificate, or MCC, makes it easier for eligible buyers to qualify for a mortgage loan. Offered by many city and county governments, they allow first-time buyers to take advantage of a special federal income tax write-off.
Under MCC programs, the lender can reduce the housing expense ratio – the percentage of gross monthly income applied toward housing expenses – by the amount of the tax savings. Normally, lenders reject loans if the housing expense ratio is too high.
Program requirements for MCCs vary, although most adhere to the following guidelines:
• The buyer must live in the home being purchased with an MCC-assisted mortgage.
• Total household income cannot exceed certain limits.
• The buyer cannot have owned a principal residence within the past three years. This restriction may be waived if a property is purchased within a certain targeted area.
• The purchase price must fall within an established limit.
If you are interested in applying for an MMC, call your local housing or redevelopment agency for more information, or contact your real estate agent.
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