Are you navigating your first home purchase or the ins and outs of what it means to have a mortgage? Being a homeowner has many benefits, but it can also be a confusing time as you figure out payments, taxes, and interest.
As you see the numbers rise when your monthly calculations come together, you may wonder how you can save money as you enter the homeownership world. A mortgage credit certificate could be your answer! But what is a mortgage credit certificate, and how can it help you?
Let’s break down how to get a mortgage credit certificate and what they are all about below.
What Is A Mortgage Credit Certificate?
A mortgage credit certificate allows qualifying homeowners to receive a refund on part of the mortgage interest payments they made throughout the year with an annual cap of $2,000. It is important to note that a mortgage credit certificate is not a tax deduction. It is simply a credit applied against your annual federal income tax during tax return season.
In most cases, your mortgage lender provides homeowners with this credit. This benefit is typically geared towards lower- to middle-income home buyers to help make buying a home easier and more affordable. Once issued, this credit lowers your federal income tax liability, which raises your net income.
Who Qualifies For A Mortgage Credit Certificate?
To qualify for a mortgage credit certificate, you must meet the following criteria:
- You are a first-time homebuyer.
- You plan to use the home as your principal residence.
- You fall within the income limits as set by the state of Illinois.
- You have a purchase loan, not a refinance loan.
- Participation in homeownership counseling or homeownership education is required (in most cases).
Benefits Of The TaxSmart Mortgage Credit Certificate Program
One of the biggest benefits of the mortgage credit certificate program is the cost savings. Owning a home is expensive. In addition to the sheer cost of a down payment and monthly mortgage payments, homeownership also comes with maintenance issues and unforeseen expenses.
These expenses add up, so having the potential to get back $2,000 every year from your previously paid interest is a huge benefit.
Another benefit of a mortgage credit certificate is that it works alongside multiple loan types and financing options. Since many first-time homebuyers often need to explore different financing options, a flexible mortgage credit certificate can pair nicely with the financing you choose.
TaxSmart Mortgage Credit Certificate Program Qualifications
So, who qualifies for a mortgage credit certificate if income plays a factor? In order to qualify, your income must fall into the right criteria. For example, if you are in a one or two-person household, the maximum income limit you are allowed is $132,360. If you live in a three or more-person household, that limit is $154,420 based on the area you choose to live in.
There are also maximum purchase price limits for the home you choose, so it is important to do your research and understand your limitations before pursuing your home purchase. The good news is that many different types of homes qualify for the credit. Single-family homes, duplexes, and even condominiums qualify, so you are able to tailor your home preferences without losing out on the mortgage credit.
Additional Read: The Home Buying Process Explained
Potential Drawbacks And Limitations
Now that the question, “What is a mortgage credit certificate?” is answered, it’s time to talk about the drawbacks of the program. Just like with everything else included in buying a home, obtaining a mortgage credit certificate will cost you.
You can expect an application and issuance fee before you can start saving. However, it is important to remember that while there may be initial fees up front, you might be in your home for many years, which will offset the initial costs enough to help you save a significant amount of money over the course of your loan.
Another drawback is the considerations and agreements you have to make in order to qualify. The counseling sessions will take up a portion of your free time, and you will have to agree to make the home you purchase your primary residence and be sure it is within the city of Chicago.
If investing in real estate is ever a goal of yours, you have to remember that you will be unable to continue benefiting from the mortgage credit if you no longer live at the residence full-time.
How To Maximize TaxSmart Benefits
The whole goal of the mortgage credit certificate program is to help homeowners save money, so in order to benefit from this credit more effectively, you should focus on saving! Just because you qualify for a more expensive home, it doesn’t mean you need to choose a home at the top of your price range.
Stay within your means so that you can still pay your mortgage every month without forcing yourself into a financially stressful situation. When it comes time for tax season, you will enjoy that extra cash and can use it for something beneficial!
Work With A and N Mortgage To Obtain Your Mortgage Credit Certificate
Do you have more questions about what is a mortgage credit certificate or how to get a mortgage certificate? Let the team at A and N Mortgage help. Contact us today at (773) 305-5626 to speak with a knowledgeable lender.
Frequently Asked Questions
Do you still have more questions about the mortgage credit certificate? Here are a few commonly asked questions regarding the MCC.
What Happens If a Homeowner’s Financial Situation Changes After They’ve Been Approved for the TaxSmart Program?
If a homeowner’s financial situation changes while benefiting from the mortgage credit certificate, a portion of that benefit is eligible for recapture by the IRS. However, the following criteria must be met: you sell your home within nine years of your purchase, you earn significantly more than you did when you bought the home, and whether or not you made a profit from the home when you sold it.
Can I Combine an MCC With Other Homebuyer Assistance Programs?
You can combine a mortgage credit certificate with other assistance programs. Depending on your situation and income level, you may qualify for down payment assistance, financial help with closing costs, and other assistance programs in the city of Chicago.
Are There Any Fees for the Mortgage Credit Certificate Program?
Yes, there are fees for the mortgage credit certificate program, but these fees vary from state to state. In Illinois, a $375 application fee is required, and a $100 fee is required if you destroy or lose your mortgage credit certificate.
Discover more about the question, “TaxSmart Mortgage Credit Certificate Program?” and similar concerns by reaching out A and N Mortgage in Chicago, IL.
