How a Mortgage Credit Certificate can help you buy a home

sub urban neighborhood house

You may be eligible for a federal income tax credit to help you purchase a home if you are a first time, low or moderate income homebuyer. We invite you to look through our program to learn about the features and eligibility requirements.

THIS PROGRAM IS CURRENTLY OUT OF FUNDS

What is a Mortgage Credit Certificate (MCC)?

A Mortgage Credit Certificate provides eligible, first-time homebuyers with a federal income tax credit based on 20% of the annual interest paid on a mortgage.  The tax credit is a dollar-for-dollar reduction to the homebuyer’s potential federal income tax liability that increases the household income available to qualify for a home mortgage and to make monthly mortgage payments.

With an MCC you can:

  • Receive a dollar-for-dollar tax credit which reduces your potential federal income tax liability
  • Save money and increase the amount of your disposable income available to purchase a home
  • More easily qualify for a higher first mortgage
  • Take advantage of the tax credit every year for the life of the original first mortgage
  • ​Reapply for a Reissued Mortgage Credit Certificate (RMCC) when you refinance your mortgage

Program Requirements

  • Be a first-time homebuyer which is defined as someone who has not had an ownership interest in a principal residence at any time during the past 3 years. (EXCEPTION: This requirement does not apply to someone purchasing a home in a targeted area.)
  • Occupy the home as your principal residence
  • Applicants must be within the income limits below (there are target and non-target areas)
  • ​Purchase an eligible home in the City of Los Angeles   

Size of Household

Income Limits

 

20% Tax Credit

20% Tax Credit

 

Non-Target Area

Targeted Area*

1-2 person(s)

$108,120

$108,120

3 or more

$126,140

$126,140

Purchase Price Limits

Non-Target Area

Target Area

Existing Housing

$585,714

$715,872

New Construction              

$585,714

$715,872

* List of targeted census tracts or a census tract map.

  • Purchase a one unit, single family residence, townhome, or condominium within the purchase price limits above
  • ​There is an application fee of $150

Example of How this Program Works

Mr. Jones qualified for a first mortgage loan of $300,000 at a fixed interest rate of 4.50% for 30 years.  He purchased a home in a non-targeted area which qualifies him for an MCC tax credit of 20%.

The mortgage interest tax credit amount will be determined as follows:

  • $300,000 x 4.50% = $13,500 (estimated first year’s mortgage interest)
  • 20% (MCC tax credit percentage) x $13,500 = $2,700 (Year 1 MCC value)
  • $2,700 / 12 months = $225 (MCC monthly value available to qualify for a larger first mortgage)
  • ​$13,500 - $2,700 = $10,800 (mortgage interest still eligible for the standard mortgage interest tax deduction)

By adding the MCC monthly value of $225 to the maximum available monthly income for the first mortgage, Mr. Jones qualifies for a higher first mortgage; therefore, the MCC increases Mr. Jones’ purchasing power.

How to Apply

Please contact one of our Participating Lenders to get pre-qualified for a first mortgage and City Mortgage Credit Certificate or call (213) 808-8800 for more information.