FLORIDA HOUSING FINANCE Partners/Lenders...information is correct in online reservation system. Closer then submits closing documents to closing agency/attorney. ... Florida Housing Finance Corporation
Post on 13-Feb-2018
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MORTGAGE CREDIT CERTIFICATE
WHAT IS A MORTGAGE
A MCC creates a non-refundable federal income tax credit and is issued to first time homebuyers in conjunction with their mortgage.
A MCC allows a qualified homebuyer to write off a portion of the annual mortgage interest as a special tax credit, not to exceed $2,000, during each year that they occupy the home as their principal residence.
The portion or amount of the tax credit is equal to the mortgage credit rate of 50% (Florida Housings rate) multiplied by the annual mortgage interest paid.
This credit reduces the federal income taxes of the buyer and has the potential of saving the MCC holder thousands of dollars over the life of their mortgage loan.
TAX CREDIT" VS. TAX DEDUCTION
A tax credit entitles taxpayers to subtract the
amount of the credit from their total federal income
tax liability, receiving a dollar for dollar savings.
A tax deduction is subtracted from the adjusted
gross income before federal income taxes are
computed. Therefore, with a deduction, only a
percentage of the amount deducted is realized in
2012 MORTGAGE CREDIT
The program administration and
compliance will be handled by Florida
Housing staff- not by eHousing or US Bank
A MCC is an enhancement to YOUR first
mortgage, not Florida Housings as in the
All loans are retained and serviced or sold off
by the originating lender
2012 MORTGAGE CREDIT
Program Period Expiration December 31, 2014 or until funds have been fully utilized. However, Florida Housing has resources available in case additional MCC allocation is needed.
MCC Credit Rate = 50% (.50 x amount of annual mortgage interest paid = Tax Credit Amount).
Credit is capped at a maximum of $2,000 annually.
Homebuyer may not have owned a home as their primary residence in the last three years (First Time Homebuyer-some exceptions apply).
Homebuyers household income and the purchase price must not exceed the maximum limits set by the Program.
Homebuyer must complete homebuyer education through a HUD approved counseling agency. Online education is acceptable if provided by a HUD approved counseling agency.
Homebuyer must occupy the home as their principal residence within 60 days of closing.
Homebuyer must apply for the MCC through a participating lender.
Homebuyer applies for the MCC at the same time he or she makes a formal application for a mortgage loan.
Funds will be available on a first-come first-served basis.
HOW A HOMEBUYER USES
The borrower claims the tax credit with their annual tax return using IRS Form 8396
The credit may be claimed for the life of the loan as long as the home is their principal residence
The borrowers may, if they choose, adjust their W-4s to reflect the anticipated credit
HOW A LENDER USES THE
Following Agency and/or Investor guidelines, the anticipated credit may be used to help qualify the borrower for a loan. If the tax credit is $2,000, the monthly adjustment is an additional $166.67 per month in qualifying income or is used to lower the housing expense depending upon loan type.
Step 1: Loan Officer qualifies borrower(s) for the MCC Program based on FTHB, income & purchase limit
Step 2: Loan Officer collects 3 years' tax returns from
borrower/co-borrower or spouse, completes Income Calculation Worksheet, Tax
Credit Worksheet, & provides borrower(s) with Notice to
Step 3: Loan Officer reserves loan & prints Reservation Form for submission to Underwriting.
Step 4: Underwriter certifies loan upon review of 3 years' tax
returns, applicable income documentation, Income Calculation Worksheet
completed by LO, and sales contract.
Step 5: Closing generates applicable MCC Program
documentation; Borrower/Co-Borrower Closing Affidavit,
Seller Affidavit & confirms loan information is correct in online reservation system. Closer then submits closing documents to
Step 6: Post Closing submits closed loan file & all applicable MCC Program documents to FL Housing for issuance of MCC to
Step 7: FL Housing reviews loan files for eligibility & issues
actual mortgage credit certificate upon approval to borrower & forwards copy of
MCC to lender for record retention & reporting as
required by the IRS.
Step 8: FL Housing contacts lender if there are file
deficiencies & works with lenders to clear exceptions . Ineligible loans may result in
non-issuance of MCC to borrowers.
Step 9: Lender reports MCC recipients to the IRS annually
as required by the Internal Revenue Service.
ELIGIBLE LOAN TYPES
Fannie Mae Conventional
Freddie Mac Conventional
Eligible Loan Terms:
All loan types must be 30 year fixed rate purchase money mortgage
NO ARMs or Interest Only Loans
All loans must be originated in accordance with agency guidelines
Prevailing market ratesset by lending institution
Cannot be used with bond financing
ELIGIBLE PROPERTY TYPES
ELIGIBLE PROPERTY TYPE New or Existing Single Family Units Town homes Condos Manufactured Homes Must meet FHA Standards
PROPERTIES NOT ALLOWED Rental Homes Co-ops Investment Properties Recreational, Vacation, or Second Homes
Must be borrowers primary residence. Homebuyers must not use more than 15% of the residence in a trade or business, including child care.
*Definition of Targeted Area Census tract in which seventy percent (70%) or more of the families have an income which is eighty percent (80%) or less of the statewide median family income.
Properties within a Targeted Area-
First Time Homebuyer Requirement is waived No tax returns required
Higher Income Limits Up to 120 and 140% of AMI
Higher Purchase Price Limit
Refer to the 2012 MCC Program Guide for a list of the Qualified Census Tracts.
IRS CODE REQUIREMENTS
FIRST TIME HOMEBUYER REQUIREMENT
Homebuyers using the program cannot have had a present ownership interest in any principal residence during the last three years. This will be determined by the following:
Past three years signed tax returns (2009, 2010 and 2011 tax returns are currently required). Review for mortgage interest deduction or any type of homeowner tax credit which may indicate homeownership.
IRS CODE REQUIREMENTS
Signed tax returns are required from all borrowers who will be on title as well as non-borrowing spouses.
IRS transcripts will be accepted in lieu of the 1040 EZ, 1040 A, or 1040
If a borrower was not required to file federal tax returns in a particular year(s), an IRS printout stating No Record Found must be provided or other confirmation issued by the IRS confirming borrower was not required to file a return for that year.
Definition of Household Income means all sources of revenue or income of the mortgagor (or mortgagors) and any other person 18 years of age or older, who is expected to permanently reside in the home being financed.
All forms of income including but not limited to: overtime, bonus, Social Security Income, child support, alimony, seasonal/part-time jobs, self-employment, interest and dividend income, and rental income.
Income is annualized over a 12-month period (see Program Guide).
Spouses income must be verified and included, regardless if they are on the loan, mortgage, deed/title, or are legally separated (not recognized in Florida).
IRS CODE REQUIREMENTS
RECAPTURE TAX Recapture Tax is a federal tax that some homeowners that utilize these programs may be required to pay from the net profit they receive from the sale of their homes. The homeowner pays recapture tax with their federal income tax for the year in which they sell their home. The maximum tax is the lesser of 6.25% of the original loan amount or 50% of the gain on the sale of the home. For Recapture Tax to apply, they must meet all of the following conditions:
Sell the home within nine years of purchase; Make a net profit on the home, after adjusting the value of the home
for any improvements or repairs the homebuyers have made, and after deducting all costs of sale, including sales commission, and;
The homebuyers household income must have increased at least 5% each year, above the applicable AMI used to qualify borrower.
IRS CODE REQUIREMENTS
Fear of paying Recapture Tax should not stop a homebuyer from utilizing the programs because of the above. Also, if the homebuyer refinances their home at a later date to obtain a better interest rate, or to use the equity they have in t