Mortgage Credit Certificates Help Buyers
Many would-be buyers are held back from making a home purchase for a variety of reasons, the bulk of it financial.
There are a great number of programs and loan products that can take a buyer from impossible to possible when it comes to buying a home, MCC programs are just one of them. And a great way Realtors can help would-be-buyers see their dreams come true.
In addition to having the necessary down payment, and funds for other miscellaneous expenses like inspections, one item that troubles many buyers when approaching a lender is their debt-to-income ratio, specifically the ratio of the expected housing expense in relationship to the income.
Q: What are mortgage credit certificates?
A mortgage credit certificate, or MCC, makes it easier for eligible buyers to qualify for a mortgage loan. Offered by many city and county governments, they allow first-time buyers to take advantage of a special federal income tax write-off.
Under MCC programs, the lender can reduce the housing expense ratio – the percentage of gross monthly income applied toward housing expenses – by the amount of the tax savings. Normally, lenders reject loans if the housing expense ratio is too high.
Program requirements for MCCs vary, although most adhere to the following guidelines:
- The buyer must live in the home being purchased with an MCC-assisted mortgage.
- Total household income cannot exceed certain limits.
- The buyer cannot have owned a principal residence within the past three years. This restriction may be waived if a property is purchased within a certain targeted area.
- The purchase price must fall within an established limit.
Q: How do I take advantage of an MCC?
Your real estate agent (a good one) keeps a number of lenders with various loan products in their back pocket for referring. Not every situation is the same and loan products and services vary. Your real estate agent is a one of the best resources to utilize to explore ways of making a home purchase a reality.
If you're shopping for a home in SW Ohio, Dayton to Cincinnati, I'll be glad to point you in the right direction.
There are a good number of other ways to save money or find means of purchasing if you're borderline. OHFA (Ohio Housing and Finance Authority) can knock 2.5% off a down payment for instance and the savings can be even more if you're buying through OHFA.
If you're buying via FHA financing with 3.5% down, that leaves you to come up with only 1% for a down payment. Ohio Hero's program for military, police, teachers, paramedics, firefighters etc. can knock a quarter of a percent off your home loan. City and county grants can offer upwards of $25,000 for a home purchase and USDA and VA offer no money down financing.
If you'd like to talk about your options, feel free to reach out, happy to help.