Can Anyone Explain to Me What a Mortgage Credit Certificate Is? Is It Worth It?

Updated on August 23, 2012
S.G. asks from Houston, TX
9 answers

Ok so I'm looking to buy a house in Texas. I have been pre-approved and ready to go. My lender just told me about the program for a Mortgage Credit Certificate. I kinda get it but not completely. Is there a time limit you have to stay in the house and if yes and you sell before that time, do you have to pay it back?

Any information would be helpful

OK so a little more information. My credit is in a good position & I make a really good salary and I'm a habitual saver. I am definately not going to buy over my head and I completely get why the housing market is in a mess. I'm doing my homework and trying to find out all that I can. According to IRS, this is a legitimate program but differs from state to state. Some states have a limit of time on the house. For example 9 years and if you decide to sell the house within the 9 years you would have to pay back the credit. In Texas the max credit is $2000 per year. I just do not know anyone who has ever done this before and I want some opinions.

Any help is really appreciated

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So What Happened?

Thanks to everyone with the responses. This is definately not a program for me. I have talked to my CPA, as well as a realestate attorney, and a couple of other brokers. Each state is different on this program and it is intended to put people in homes with federal assistance. What they ask that you do is to change your W4 at work to where you are taking home more money so that you can pay a higher mortgage. Then when you file your taxes at the end of the year, you get up to $2000 of tax credit so it is a wash. NOW, if you decide to sell your house in Texas (different from state to state) say in 5 years, you have to notify the housing program and YES you do have to pay it all back. If you stay in the house for over 10 years, then you do not have to pay it back.

Don't remember who said it below but yes this is exactly why the housing market went down with scam government plans like this. Not for me. I have a good down payment and a GREAT interest rate. Not getting into this trap.

Thanks again to all

Featured Answers

J.W.

answers from St. Louis on

I just refinanced my mortgage and no one mentioned such a product. Either it is a scam, a way for the mortgage company to make more money or a Texas thing.

Perhaps if you explained what it is we can help.

Ahh I googled it. http://en.wikipedia.org/wiki/Mortgage_Credit_Certificate So it is a muni tax credit that apparently some clever mortgage brokers can use to qualify you for more than you can afford. You do know that is how we all got in this mess in the first place?

This is not the federal tax credit that required you to stay in the home for five years.

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T.F.

answers from Dallas on

I googled this because I have never heard of it and I have lived in TX, owned and built 3 homes, refi several times and no lender has ever mentioned this "perk".

If it is such a "perk" I think we would know about it because my hubby is very much into the numbers, financials, etc and we never pay any closing costs, points, escrow, etc for our mortgages.

I read online that you pay $75 for this certificate in order to claim a portion on your taxes only up to $2000/year. One top of that, at closing, you pay 1% of the total loan for this certificate. Let's say your total mortgage is $200,000 x 1% = $2000 due at closing along with the $75 so you are out $2075 from the get go and if you lose the certificate it is $50 for a new one. All that so you can claim a max of $2000 on your taxes? You just paid an extra $2075 for that "perk".

You already have tax benefits when you calculate the interest you pay each year on your taxes for FREE..... Why do you need to pay for what you can do yourself?

It certainly sounds fishy to me and way for the lenders to get more money out of you by promising you something that you can probably legally do yourself if you ask your tax acocuntant.

My red flag would be waving wildly if a lender mentioned this to me. I suggest you talk to your tax accountant and get all the details and fine print before you sign up for this.

Stay within your means (preferably below) and do not buy more than you can afford. Keep in mind all the extra costs of upkeep in a home as well.

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D..

answers from Charlotte on

Just say no...

Dawn

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J.B.

answers from Houston on

I understood it as being part of the stimulus package (which one, I'm not sure, lol) But it basically is an incentive to new home buyers.

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L.M.

answers from New York on

I've never heard of it. Then again, it appears that I live in a part of the country where it's not available.

I looked at this website http://www.tdhca.state.tx.us/homeownership/fthb/mort_cred...

To me, I think you need to contact your tax advisor/accountant to see if it would be beneficial to you based on your personal financial status.

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C.B.

answers from San Francisco on

Like Jo W said, it allows you to qualify for a mortgage that you otherwise would not qualify for because they take the $2,000, divide that by 12 and consider that amount as "additional income."

This is exactly how we got into the housing/mortgage crisis in the first place with the use of the "interest only" loans. I would steer clear of this and only look to purchase a house you qualify for WITHOUT this messy credit thing.

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G.H.

answers from Chicago on

STAY AWAY from this stupid program. I was a mortgage broker for over 20 years. Just like I wouldn't put anyone in a stated income mortgage or a 125% mortgage, I sure wouldn't put anyone in this program. Yes you will have to pay it back, nothing is free, even from the government and all their "everyone deserves to own a home, even if you cannot afford it" programs.

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C.T.

answers from College Station on

Please call or email Dave Ramsey...he has a website..hopefully you know who I am talking about. He is the only one I would trust to tell you the truth about and "Mortgage Credit Certificate" and the best way to buy a house in Texas.

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D.N.

answers from Chicago on

I googled it and found a site from Texas that explains it really well. Nothing states it is only if you live for so many years. Just as long as it is your principle residence.

www.tdhca.state.tx.us

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