Do you know about the MCC (Mortgage Credit Certificate)? Do you need the MCC? Is the MCC necessary?
No, not always, but there are some situations where you may NEED the MCC.
The MCC is optional, but for some it may become necessary. The mortgage credit certificate allows you to claim 20-50% (% varies on loan amount) of your mortgage interest as a tax credit, lowering your tax liabilities. This allows you to adjust your federal withholdings so you are able to put more money back in your paycheck.
With this increase in your paycheck it can lower your DTI (debt-to-income)ratio allowing someone who may be just at the cusp of not qualifying.
For example, we had a client that qualified for the MCC but was choosing not to get it at the time of purchase and did not need the MCC to qualify. But after receiving the appraisal we found out that they would need to get flood insurance. With adding flood coverage to their home owner insurance it increased their monthly mortgage payment. The increase put their DTI above qualifying limits by just dollars!! So adding the MCC was not a choice, it was necessary if they wanted to purchase this home. Getting the MCC saved their home purchase.
My best advice is, if you qualify for the MCC then apply for it with your home purchase! You don’t want to take the chance that if you may need it, end up being too late in the process to apply for it. **Also please note your lender needs to be approved for the MCC, so make sure you are working with an MCC approved lender! (wink, wink, we are approved) Could you imagine if you were in need of getting the MCC and your lender wasn’t approved?!
Until next time,