OCHFA Mortgage Credit Certificates (MCC)

The OCHFA Mortgage Credit Certificate (MCC) Program can help first-time buyers purchasing in Oklahoma County, OK with allowing a buyer to take a tax credit when purchasing a home. The MCC can be used with the OCHFA First Mortgage Program or as a stand alone.

Please speak with your tax advisor or tax professional or tax preparer to determine your estimated tax liability and the value of the MCC. The following information is for informational purposes only and does not constitute professional tax advice.

What's the Mortgage Credit Certificate, MCC for Short?

Let’s start with the basics. The Mortgage Credit Certificate is not a down payment assistance program. The MCC program provides a federal tax credit each year you live in the home that will reduce the amount of federal income tax paid. And the borrower may claim the MCC each year the home remains their principal residence. The MCC is a very powerful subsidy that a homeowner may claim each year they live in the home.

What's the benefit of the MCC Tax Credit?

What’s the benefit of the MCC Tax Credit? There are certain tax benefits to being a homeowner, such as annually homeowners may claim mortgage interest paid on primary residence as a tax deduction. The MCC allows 50% of mortgage interest paid to become a tax credit. The remaining mortgage interest paid remains a tax deduction.A deduction is subtracted from the adjusted gross income before federal income taxes computed. A tax credit is subtracted from the total federal income tax liability and provides dollar for dollar reduction of liability limited to the homeowner’s tax liability.

What's the different between a Tax Deduction and a Tax Credit?

First let’s look at the difference between a tax credit and a tax deduction. This is where most people do not understand the power of a tax credit. In General, tax credits tend to be more valuable compared to deductions. That’s because a tax credit is a dollar-for-dollar reduction of the income tax owed. For example is a tax credit and tax deductions are both valued at $1,000 and the homeowner tax liability is $3,000 here is how the $1,000 would be applied for each.

A tax credit worth $1,000 would be subtracted from the tax liability of $3,000 leaving a $2,000 tax bill. This is a dollar-for dollar reduction.

A tax deduction works differently and that is because you need to take into account the tax bracket in which a person will fall. For a tax deduction worth $1,000 first determine the tax bracket, for this example we will use a 12% tax bracket. Then take 12% of $1,000, that leaves you with $120. The $120 will be deducted from a person’s taxable income NOT a tax bill. As you can see the tax credit is a powerful tool.

If I receive a Tax Refund does that make me ineligible for the MCC?

No, it just means you overpaid the IRS. To benefit from the MCC you must have tax liability. DO NOT confuse tax liability with a refund. IF you received a refund, it does not mean you are not eligible. A refund is exactly that, a refund, essentially you overpaid the IRS and you are receiving a refund. But it does not make you ineligible for the MCC.

How can I determine my tax liability?

To determine tax liability, look at your latest tax return. Line 24 of the IRS form 24 will show your tax liability.

How long can I claim the MCC?

For as long as you live in the home and you do NOT refinance your first mortgage. If you refinance, you will lose the MCC.

ELIGIBILITY CRITERIA* –

1. Buyers (and spouse if applicable) must be first-time buyers.
2. All applicants must be considered irrespective of age, race, color, religion, national origin, sex, marital status, military status or physical handicap.
3. Buyers must occupy the property purchased within 60 days of closing.
4. Buyers must live in the property as their principal residence and the property may never be rented.
*Speak with a participating lender for details.

First-Time Homebuyer is defined as the borrower must have had no ownership Interest in a principal residence at any time during the three-year period prior to the date on which the Mortgage Loan is executed, unless the borrower is a Veteran or the subject property is located in a targeted area.

First Time Homebuyer exemptions: If the borrower is a Veteran who meets "veteran" status as defined by program or buyers purchase a home in a target area as defined by the program. Those borrowers would not need to be first time homebuyers.

WHAT IS A NON-TARGETED AREA AND TARGETED AREA?
The First Home Program is available in all of Oklahoma County. A majority of Oklahoma County is considered a non-target area.

However, there are Targeted Areas identified by HUD (by specific census tract number) as an area of economic distress or have low loan origination. When you purchase a home in a Targeted Area you do not need to be a first-time buyer, the income limits and purchase price limits are higher.

HOMEBUYER EDUCATION

All buyers (any person on title to the property) must attend an approved homebuyer education course. A non-occupant co-signer does not need to attend. Homebuyer education must be conducted PRE-CLOSING and by HUD-approved counseling agencies including online HUD-approved non-profits using eHomeAmerica (Neighborworks based curriculum).

ELIGIBLE PROPERTY

New or existing, one unit, detached or attached, PUD's, condos, and townhomes.

INCOME LIMIT CRITERIA

Include income for the buyer (and spouse if applicable) and anyone 18 years of age or older who will live in the property.

Non-Targeted Areas
1-2 person households $97,700
3 or more person households $112,355

Targeted Areas
1-2 person households $117,240
3 or more person households $136,780

MAXIMUM SALES PRICE LIMIT

This price must include everything paid by the buyer or on the buyer's behalf.

Non-Target Areas $544,232
Targeted Areas $665,173

What's the Next Step?

1. Click on the link Approved Lenders (at the top of the web page) to view a list of approved loan officers.
2. Work with your loan officer of choice to be pre-approved for a mortgage loan AND the OCHFA First Home Program. Your loan officer will do all the work, the entire process is conducted with the Loan Officer.
3. Work with a OCHFA Certified REALTOR Partner. Once you are pre-approved an know what price range to consider, we recommend you work with a licensed REALTOR to guide you with locating your first home.