What is KHC's Home Buyer Tax Credit?
KHC's Home Buyer Tax Credit is available through Mortgage Credit Certificates (MCC), which reduce the amount of federal income tax you pay, giving you more available income to qualify for a mortgage loan. MCCs are NOT mortgages. They are tax credits that put extra cash in your pocket each month, so you can more easily afford a house payment. That means fewer tax dollars will be withheld from your regular paycheck, increasing your take-home pay. The federal government allows every homeowner an income tax deduction for all the interest paid each year on a mortgage loan. But an MCC gives you a tax credit of 25 percent (not to exceed $2,000). You can still deduct the remaining 75 percent interest on your income taxes. A tax credit is not the same as a tax deduction. A tax deduction reduces the portion of your income that is taxed, so you pay less. A tax credit is a direct, dollar for dollar reduction in the total tax you owe. The MCC is effective for the life of the loan as long as you live in the home. If you sell your home in the first nine years of ownership, you may be subject to Federal Recapture Tax.
Eligibility to apply
You may qualify for the program if:
- You are purchasing your first home.
- You have not owned a home in the last three years.
- The home you wish to buy is located in an area of the state which is exempt from the first-time home buyer rule. (Your local lender can determine those “targeted areas.”)
Maximum home sales price is $243,000.
Maximum income limits:
1-2 person household : Up to $85,560
3-4 person household : Up to $99,820
You must meet lender, KHC, FHA, VA, RHS, Fannie Mae, and/or Freddie Mac standards for creditworthiness. You must occupy the property.
It cannot be used for business, commercial, or rental purposes.
Applicants need a sales contract with a legal description of the property, a $500 MCC fee, and copies of federal income tax returns for the past three years.
How to Apply?
Applications are accepted on a first-come, first-served basis by a statewide network of local lenders. MCCs are available with FHA, VA, RHS, Fannie Mae, and Freddie Mac Conventional 30-year mortgages at a fixed-rate. MCCs cannot be used with KHC’s Mortgage Revenue Bond program, but may be used with KHC’s GNMA Secondary Market Program. Your local lender will submit your loan application and notify you as to whether your application has been accepted.
With an MCC from KHC, you will get direct dollar-for-dollar reduction in your federal taxes worth 25 percent of the interest you pay on your mortgage each year. You can still claim the remaining 75 percent of the interest as a tax deduction.