How It Works
A borrower pays a specific amount of interest over the course of a mortgage. Some of this interest may be tax deductible provided that buyer meets certain income requirements. In addition, some borrowers may qualify for MCCs if they meets certain conditions pertaining to previous homeownership, income, purchase price and whether or not the home is the primary residence.
The broker or lender sometimes considers the estimated tax credit amount as "additional income" in order to help them qualify for the mortgage. For example, let's say a borrower paid $800 in interest during a given year and qualifies for a 30% mortgage credit certificate. Because of the credit, the borrower will pay taxes on less of his income ($800 x 30% = $240). This $240 savings can be considered extra income when qualifying for a loan.
