The Arkansas Development
Finance Authority (ADFA) recently introduced a program that offers a Federal Tax
Credit for First-Time-Homebuyers. It is called the Mortgage Credit Certificate
(MCC) Program. The MCC Program is offered by the Internal Revenue Service to
encourage borrowers to buy their first home.
For borrowers that
qualify, if offers them up to a $2,000 Federal tax credit for each year that the
house they are buying is used as their principal residence. To qualify
borrowers must be first-time-homebuyers, except in targeted counties; must meet
household income limits, which vary by county; and not exceed a purchase price
of $225,000. The MCC is not part of the home financing, but rather an incentive
the IRS offers to get first-time-homebuyers to buy a home.
“This is a new program
that Realtors and lenders are just finding out is available in Arkansas,” said
Single Family Housing Manager Murray Harding. “We expect demand for MCC’s to be
greater than availability so awards will be made on a first come, first served
basis.”
To be eligible for the
MCC, a borrower’s mortgage loan must be a 30 or 15-year fixed-rate mortgage and
can’t be used in conjunction with a mortgage revenue bond loan. The IRS
considers both programs to be “mortgage subsidies” and to do both would be
considered “double dipping”.
The specific benefit to
a borrower is calculated by taking the amount of interest paid each year on a
mortgage loan and multiplying it by 25%. The borrower can take immediate
advantage of the MCC benefit by going to their employer and adjusting their W-4
to reflect the anticipated amount of credit. That will lower the borrower’s
Federal tax withholdings and increase a new homebuyers monthly take home pay.
The MCC Program provides
the greatest benefits to a borrower that has Federal tax liability; however,
because the MCC can provide a benefit for the life of the mortgage loan, a
borrower may not have a Federal tax liability initially but may have such a
liability in the future.
The MCC Program is
accessed through one of ADFA’s MCC Participating Lenders. A borrower must apply
and be approved for the MCC prior to closing on the purchase of a home.
Participating lenders, county income limits and detailed program information can
be found on the ADFA web site – www.arkansas.gov/adfa . You may also call
ADFA at 501-682-5900 and ask for the Single Family Division.
No comments:
Post a Comment