When you apply for a mortgage, your lender may talk about mortgage interest credit with you. What is it and how will it benefit you?
At its simplest, a mortgage interest credit is a mortgage assistance program that allows home buyers to claim a dollar-for-dollar tax credit up to $2,000. This program is designed to help lower- to moderate-income earners make their monthly payments more affordable for as long as they own the home.
You Must Meet Borrower Criteria
To qualify for mortgage interest credit, you must meet the following criteria:
- Income & sales price limits, which vary by state
- Must be a first-time homebuyer
- Must use the home as the primary residence
- Must take homeownership education courses, which vary by state
If you are not a first-time homebuyer, you may still be able to qualify if the home you are purchasing is in an area that has been designated as economically distressed.
A Mortgage Credit Certificate Is Required
Before you can benefit from mortgage interest credit, you must get a mortgage credit certificate. This document is provided by the originating mortgage lender that allows the borrowers to convert a portion of their mortgage interest into a non-refundable tax credit. This certificate can also help moderate- to low-income borrowers purchase a home since their tax liability has been lowered.
Each State Has Different Requirements For Mortgage Interest Credit Programs
State and local Housing Financing Agencies (HFA) issue these programs, so they will vary. Research your options in the state in which you wish to purchase before going through with a mortgage interest credit program. Work closely with a trusted lender to understand the program and its requirements.