Mortgage Credit Certificate
Manual Available at:
The MCC is a federal income tax credit.
With the MCC, the qualified homebuyer is eligible to
reduce their amount of federal tax liability equal to a
portion of the annual interest paid on their mortgage
in the form of a special tax credit.
How the MCC Program Works
•A qualified homebuyer is eligible to reduce their amount of federal tax
liability equal to a portion of the annual interest paid on their mortgage
as a special tax credit.
•The amount of the credit is equal to 20% credit rate on the MCC
multiplied by the annual interest paid.
•The lender takes into consideration the effect of the MCC when
determining the total amount of household income available for the
monthly housing payment.
•All potential applicants should contact a qualified tax preparer.
Value of a Tax Credit vs. Tax Deduction
$200,000 mortgage x 6% interest = $12,000 annual interest
$12,000 times 20% credit = $2,400
w/MCC w/o MCC Tax Credit
Tax Credit Tax Deduction
Total Income (married, joint filing) $60,000 $60,000
Standard Deduction (9,700) (- 0 -)
Itemized Interest (- 0 -) (12,000)
Exemptions (2) (6,200) (6,200)
Total Taxable Income $44,100 $41,800
Federal Income Tax Liability 5,904 $5,559
MCC Credit (2,400) (- 0 -)
Taxes Paid $ 3,504 $ 5,559
Effective Interest Rate
$200,000 Loan Amount
$2,400 Annual Credit/12 = $200 per month
MCC No MCC
Interest Rate 6.0% 6.0%
Term 30 years 30 years
Monthly P & I $1,199 $1,199
MCC Rate 20% 0
Monthly Credit $200 0
“Effective” P & I $999 NA
Effective Interest 4.38% NA
Tax Credit is more valuable than a deduction
Can still deduct remaining 80% of interest paid
Increases homebuyer’s take home pay - file amended W-4
Can qualify for a larger mortgage loan
$200 monthly benefit = $33,358 of additional loan funds
Valid for the life of the loan, as long as the borrower remains
owner-occupant of the residence
Credit may be reissued after refinancing
One-time fee of $650
Unused credit carry-forward up to 3 years
•Any loan officer is eligible to offer the program.
•Bank funding the loan must sign a participation agreement prior to
•Loans can be brokered to a participating lender or sold on a correspondent
basis. Please check with a participating lender prior to proceeding.
•Uses lender’s first mortgage product including FHA, VA, Fannie Mae,
Freddie Mac, and all loan types listed on page 2.1 of House Key manual.
•Additional revenue for lenders
Maximum Annual Household Income Limits
County 1-2 persons 3+ persons 1-2 persons 3+ persons
Island $75,000 $87,000 $90,000 $95,000
Pierce/San Juan $75,000 $87,000 $75,000 $87,000
King/Snohomish $90,000 $97,000 $90,000 $97,000
All Other Counties $65,000 $75,000 $75,000 $75,000
IRS Tax Code Compliance:
• Owner Occupancy
• First Time Homebuyer
See section 3 of House Key manual
for further information
Includes all occupants who reside in the household
including children, significant others, roommates, etc.
You must include income from all persons 18
years of age and over who will be residing in
Non Occupant Co-signers are not allowed.
Future Projected Income for one year following
loan closing (anticipated income)
Includes ALL sources of income
See Section 3 of House Key manual.
Acquisition Cost Limits
Maximum acquisition cost limits of a single-family
residence must not exceed the following:
County Non-Targeted Targeted
Clark/Island $330,000 $360,000
Jefferson/Pierce/Snohomish $370,000 $395,000
King/San Juan $450,000 $475,000
Kitsap/Whatcom $300,000 $335,000
Skagit $285,000 N/A
All other counties $270,000 $290,000
•The property cannot contain more than one
•Cannot have more than one service meter
supporting the entire property
•Cannot have excess land value - less than two
•No more than 15% of the residence may be
used for trade or business purposes
See Section 4 of House Key manual
All borrowers on the note and deed of trust
must attend a Commission sponsored
homebuyer education seminar prior to
reservation of MCC.
First Mortgage Guidelines
•MCCs are available with all loan types listed on page 2.1
of the House Key manual. They are also available with
fixed or adjustable rate conventional conforming (i.e.,
Fannie Mae or Freddie Mac saleable), FHA, VA, or Rural
•MCCs NOT available if the first mortgage is a House Key
•Lenders will establish all underwriting criteria, including
interest rate, down payment requirement, term, fees,
points, and closing costs based on the mortgage loan type.
•Participant Lenders may charge up to a $100 MCC
processing fee at closing.
The recapture tax provision applies.
ALL Three Things Must Happen :
•Sell - 9 Years
•Net Capital Gain
•Income Over Federal Limit
Please see Section 5 of House Key manual.
•Application - Recapture Provision Notice of
Potential Recapture Tax on Sale of Home (MCC
•Closing - Recapture Provision Notice of Potential
Recapture Tax on Sale of Home (MCC 13.8)
Step 1 Borrower completes a Commission sponsored homebuyer education seminar
Step 2 Buyer and Seller to sign and execute purchase and sale agreement
Step 3 Borrower makes application with a loan originator
Additional forms/items needed at loan application:
•Homebuyer Education certificate for each borrower that will be on the loan
•Tax returns for prior three years
•Recent pay stubs within 45 days of closing
•Notice of MCC Fee Guidelines (MCC13.3)
•Notice of Potential Benefits Provided by a Mortgage Credit Certificate
•Application Recapture Provision (MCC13.5)
•Mortgagor Affidavit (MCC13.6)
•MCC Tax Credit Worksheet (MCC13.1)
Step 4 Loan originator to reserve MCC allocation on line or using Reservation Form
(MCC13.9) if sending to another lender on broker or correspondent basis
Step 5 Process/underwrite mortgage loan according to first mortgage guidelines
Submit Pre-Closing Checklist (MCC13.2) for preliminary compliance review and
Step 6 Close mortgage loan and wire $650 MCC Fee to Commission
Additional forms/items needed at loan closing:
•Seller Affidavit (MCC13.7)
•Closing Recapture Provision (MCC13.8)
•Re-executed Mortgagor Affidavit (MCC13.6), if necessary
Step 7 Send MCC Post Closing Checklist (MCC 13.13) and required documents to the
Step 8 If approved, the Commission will deliver original MCC to MCC Holder and send a copy
to the Participant Lender
Use of the MCC
•The MCC holder should consider adjusting his or her federal income tax withholding to
receive the benefit from the credit on a monthly basis.
•The MCC holder may file a new W-4 form with his or her employer reflecting the MCC
•A letter will be sent to the MCC holder with the Mortgage Credit Certificate explaining how
to claim the MCC.
We can reissue under certain circumstances:
•The reissued MCC must be completed within one year of refinance;
•The reissued MCC must be for the same residence as listed on the MCC;
•The reissued MCC replaces the existing certificate;
•The certified mortgage amount on the reissued MCC doesn’t exceed the outstanding balance of
the mortgage amount prior to refinancing. MCC holders may refinance for an increased
mortgage amount but will only receive the MCC credit to interest incurred from the existing
balance of the original mortgage;
•The reissued certificate credit rate cannot exceed the certificate credit rate specified in the
existing Certificate; and
•The reissued MCC does not result in an increase in the credit in any taxable year.
•A $375.00 non-refundable application fee must be included in a reissuance request.
Participant Lender Reporting
Participant Lenders shall file an annual report with the Internal Revenue Service on
IRS Form 8329
Participant Lender shall retain on its books, records and have available a summary of loans
which includes the following information for 6 years:
•The name, address, and Social Security number of each MCC holder.
•The name, address, and federal taxpayer identification number (91-1874730) of the
•The date the loan was closed, the date the MCC was issued, the certified
indebtedness amount, the credit rate under the MCC, and the amount of MCC issued.
Participant Lenders are subject to the penalty provisions of Section 6709(c) of the Code.
These provisions apply to the failure of Participant Lenders to file IRS Form 8329 and shall
survive the termination of this MCC Program or any resignation of the Participant Lender.
How Do I Become a Participant Lender?
All loan originators are eligible to offer MCCs to their
The lender approving and funding the loan is required to
sign the MCC Participation Agreement prior to offering
the MCC program to customers located at
The agreement details the Participant Lender’s
responsibilities, including reports provided to the IRS.
There is a $500 participation fee.
Where is the MCC
Program Manual Located?