What Is A Mortgage Credit Certificate?

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Published on September 4, 2018

A Mortgage Credit Certificate is a certificate that people can use to help purchase a home that will be their primary residence that will entitle a homeowner to a special tax benefit. This tax benefit is taken each year when the homeowner files their federal tax returns. These certificates are sold through special housing assistance programs and are generally purchased when a home buyer is closing on their new home.

There will be a list of requirements you will have to meet in order to be able to qualify for a mortgage credit certificate. Generally, you will have to apply through the housing agency's loan program to see if you qualify for this benefit.

What Qualifications Are There To Getting a Mortgage Credit Certificate?

The requirements that you have to meet in order to qualify for a mortgage credit certificate will vary from state to state. However, most states have some general requirements that they all share about what qualifications you must meet in order to qualify for a mortgage credit certificate. Some of those qualifications include the following:

  • limitations on your household income
  • a maximum mortgage amount (meaning your house cannot be worth over a certain amount of money)
  • you cannot have owned a home in the last three (3) years

If you meet these qualifications, as well as any others that are present in your state, you may qualify for a mortgage credit certificate.

What Are The Benefits Of A Mortgage Credit Certificate?

Most people know about the tax break that you can get with a mortgage credit certificate, but there are more benefits to it than just the tax break. Some states include special exemptions such as Maryland who allows the homeowner to take up to 25% off of their mortgage interest (up to $2000 per year) instead of credit deductions. This saves the homeowner more money as the homeowner's money is going to pay the direct principal on the loan rather than interest. Many other states provide many similar benefits to residents in their states as well.

Keep in mind that if you qualify for the mortgage credit certificate you are able to claim that tax off of your income every year, not just for the year that your mortgage is closed in. This allows you to build repeated savings and put the money towards the principal loan you have out on your home rather than the interest the company is charging you.

Occasionally These Requirements Are Waived:

It's fairly rare, but during some times of crisis, at the discretion of the IRS and states governments, the income limits, housing values, etc. can be waived to allow others to qualify of these mortgage credit certificates. This is usually most common during times of economic crisis or when the housing market is slow and they are looking to spur growth.

It might be worth checking if the mortgage credit certificate qualifications are changing at the time you are looking to close on a home. If they have, it can save you quite a bit of money on the interest you are paying on your home, which can help you pay off the loan faster and count money towards the principal rather than the interest rates that the banks are charging. This is a smart move as it can make your money work harder for you.

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