Mortgage Tax Credit - This is a Really Good Deal!!

TAKE CREDIT is a brand new program that has just been rolled out by THDA and F&M was the first local bank to get approved to offer it.  Take Credit is a Mortgage Credit Certificate (“MCC”) program administered by THDA. An MCC is not a loan. An MCC permits an eligible homebuyer a federal tax credit up to a maximum of $2,000 per year based on the mortgage interest paid by the homebuyer. Notice that I didn’t say “deduction” – I said CREDIT! 

With this program, a homeowner can get up to a $2,000 reduction in his/her tax liability per year based on interest paid – not just use the interest to offset taxable income at the applicable tax bracket.  If the client is eligible for the program, he gets to reduce his tax liability for the full $2,000 of interest paid.  If more interest than that is paid, the rest may be used in the normal way as a deduction against taxable income.  The tax credit may be used to lower a homebuyer’s income tax liability each year the home remains owner-occupied by the certificate holder (the homebuyer).  And it is available to the homebuyer for the life of the mortgage loan as long as the homebuyer lives in the home and as long as the MCC has not been revoked – so up to a $60,000 potential savings over the life of the loan!

So what is required?

The homebuyer may be eligible for TAKE CREDIT if all of the following conditions are met:

• The homebuyer is purchasing a primary residence in Tennessee
• The homebuyer is a first-time homebuyer, is an honorably discharged U.S. military veteran, has not owned a home in the last three years, or buys a home in a “targeted” area
• The homebuyer occupies the home as a primary residence
• The household income falls within the income limits for the county in which the primary residence is purchased
• The purchase price of the home is within the limits established for the county in which the primary residence is purchased
• The homebuyer completes the required Homebuyer Education course

Click here to see a list of Income Limits and Purchase Price Limits
Click here to see a list of Targeted areas

Ironically, the program may not be used with a THDA mortgage loan. So to be eligible for the program, the homebuyer must be eligible for a THDA loan, but actually be getting another type of loan (conventional, FHA, VA, etc…).  The homebuyer must apply for the program and receive approval for the MCC prior to closing on the home being purchased.  That is important to know as we would need to engage the application for this program as part of the mortgage process once a client has gotten a home under contract.  While this program may not be helpful to the masses, there is certainly a good size group of first-time homebuyers that could benefit greatly from it.  And we love helping our clients be financially successful!  This is definitely a program to keep in mind.