Denver Real Estate News
Home buyers who plan to purchase in the City and County of Denver need to know about the Mortgage Credit Certificate (MCC) offered by Denver. Not everyone can qualify, but those that do stand to gain a significant benefit.
Here’s the scoop…Denver Mortgage Credit Certificate
The Mortgage Credit Certificate (MCC) is a program offered to qualified buyers that will allow them to receive an annual federal income tax credit equal to 20% of the annual interest they pay on the mortgage loan. This differs from the standard interest deduction in that, it is a dollar for dollar reduction in taxes owed by the borrower.
Borrowers have a choice…
They can choose to adjust their W-4 withholding and receive the value of the credit – this gives them more buying power sooner. Or they can submit the credit certificate with their 1040 form at the end of the year. Either way this means HUGE savings for a borrower!
There are some other stipulations…
There is a limit on the amount of money available in the program. Currently (on June 1, 2010) there was $14,000,000 still available. NOTE: this program is not new. It’s been available for at least 15 years. Normally when the program runs out of money it gets refunded by the U.S. Gov.
The Mortgage Credit Certificate is for First Time Home Buyers
First Time Home Buyers are described as anyone who has not owned a home in the last 3 years. This fact is validated when the borrower submits their three years of tax returns.
Income Limitations are Generous!
Borrower is required to purchase as primary residence. Non-owner occupant co-mortgagors are allowed (Mom & Dad!) provided that combined income does not exceed income limitation (that could nix it!). The non-occupying co-mortgagor is not required to be a first time home buyer.
There is a submission process that the lender must go through. It takes a minimum of 4 weeks to complete. The buyer MUST complete a Homebuyer Education course certificate, obtained through a HUD approved agency. The process can be completed in conjunction with the mortgage loan, so it’s NOT an additional 4 weeks.
There is a fee (non-refundable) to make application in the amount of $75.00 plus .15% of the mortgage amount for the MCC Issuance Fee paid to the City and County of Denver. Most reliable lenders will be able to tell borrower in advance of paying this fee if there is a very good chance to obtain the certificate.
In some cases when the borrower goes to sell the property he may be subject to a “recapture tax.” If a recapture tax is owned it is computed and paid to the IRS for the tax year in which the home is sold. For the average buyer in thiws program, it’s unlikely they will be required to pay because their income is lower than that allowed without penalty.
A recapture tax is due only if:
- the borrower sells his home in under 9 years
- the borrower receives a “gain” on the sale of the home and the borrower’s income has increased significantly over the 9-year (typically more than 5% per year)
- a recapture tax is due, it will be based upon the lesser of 6.25% of the original loan amount or one half of the gain on the sale of the home.
Let’s Look at an Example (this is for explanation purposes only!)
Assuming a borrower could qualify for the mortgage and the mortgage credit on a home purchase of $350,000, with an income of $68,000, interest rate (available today but who knows how much in the future) and a 15% tax bracket. Here are the numbers.
Using Denver’s Mortgage Credit Certificate a borrower could save $2603 a year, or $216 a month!
Buyers may be interested in knowing what the average home/condo sale price is in the City and County of Denver. As of July 2010 here are the average home sale prices:
Now what? Need a lender to contact? The nice lady who provided me with the above information is experienced in doing Denver’s Mortgage Credit Certification, she’s done many in the past and is not afraid of tackling the paperwork for you. (note: many mortgage lenders are not willing to go the extra mile, qualified to do it or more importantly experienced in doing so.) My suggestion would be to give Jaxzann Riggs at The Mortgage Network 3030-394-2121 a call.
If you are interested in seeing homes for sale in Denver, feel free to use my Denver Home Search website. You can be looking at all the homes for sale in Denver immediately!