Mortgage Credit Certificate

The Portland Housing Bureau (PHB) partners with local lenders to offer eligible first-time homebuyers a federal tax credit called a Mortgage Credit Certificate (MCC).  It is a small list of lenders but Dylan and I are both approved to originate these loans!

What is a MCC?
The Portland MCC is a direct federal income tax credit that reduces the federal income taxes of a qualified borrower.  20% of the annual mortgage interest paid is a federal income tax credit. The remaining 80% continues to qualify as an itemized deduction.

How Does the MCC Work?
Here is a brief example of how the MCC works:
Loan Amount of $200,000 at a 5.00% rate
Annual Interest      = $10,000 (200,000 x 0.05)
                   x 0.20 (20% credit)
Annual Tax Credit = $2,000
Per Month              = $166 (2,000 / 12)

In this example, the $2,000 annual tax credit would be a dollar-for-dollar tax credit reducing your tax liability by that full amount (unlike a tax deduction).   The $166 per month tax credit can be used by the lender in determining what you qualify for which means the buyer could obtain a higher priced home when using the MCC.

Benefits of the MCC
  • Helps address the minority homeownership gap
  • Lower homebuyer’s tax liability
  • Increases homebuyer’s purchasing power
  • Lower debt-to-income ratios
  • Helps make homeownership more affordable in Portland
  • It’s a tax credit (not a deduction)
  • Available throughout City of Portland
  • A program for households who don’t qualify for many other programs
Eligible Homebuyer
  •  Borrower/Co-Borrower must be first-time homebuyer(s) – except in “Target Areas”
  • Must complete homebuyer education prior to closing
  • Must occupy the property as their primary residence
  • $775 fee due at closing
  • Borrower/Co-Borrower annual income limits:
                        1-2 persons                 3+ persons
$73,900                    $84,985

Eligible Property
  • Property must be located within the Portland city limits. To verify go to
  • Single-family units only, including condos and townhomes
  • Purchase limit is $366,835
Other Program Rules
  • May not be combined with Oregon Bond or an Oregon Department of Veterans Affairs (ODVA) loan
  • Borrowers must have a tax liability to get and benefit from an MCC
  • Combined with a fix-rated, fully amortized loan
  • Must remain owner-occupied to receive the tax credit
  • Only available through approved MCC Lenders
  • Federal recapture tax applies (just like Oregon Bond)
  • First mortgages only
  • Must meet first mortgage lender requirements
IRS Recapture Tax
The federal recapture tax applies if and only if… 

  • The home is sold within the first nine years of ownership, AND
  • The borrower makes a profit on the sale of the home, AND
  • If borrowers’ adjusted gross income exceeds the applicable income for the year they sell
Most borrowers do not have a recapture tax liability.  No tax if there is not gain on the sale of the home or if they do not exceed the applicable income limits.  

Maximum recapture (6.25% of the loan amount) is adjusted by years owned:

More Information
For more information about the MCC or other financing options, please contact Clayton Scott.

No comments:

Post a Comment