Understanding the Michigan Mortgage Credit Certificate (MCC) Tax Credit

What Is the MCC MSHDA Tax Credit?

A Mortgage Credit Certificate is a federal tax credit based on the mortgage interest paid by a homeowner. The total benefit amount from MSHDA (Michigan State Housing Development Authority) is equal to 20% of a borrower’s total annual mortgage interest.

MSHDA offers the Mortgage Credit Certificate (MCC) Tax Credit to qualified, first-time home buyers in Michigan, and is a dollar-for-dollar reduction in the federal income taxes that a homebuyer pays each year and can be up to $2,000 annually for the life of the loan.

The MCC Tax Credit is a fantastic program that boosts benefits for first-time home buyers.



Who Qualifies for the MCC MSHDA Tax Credit?

In order to qualify for the MCC MSHDA Tax Credit, home buyers must meet certain criteria:

  • The buyer must be a first-time home buyer (someone who has not owned a home in the past three years)
  • Have a Social Security number
  • Buyer must be a U.S. citizen or permanent resident
  • Good credit history is required


Additionally, borrowers must:

  • Purchase a home less than $224,500 in Michigan
  • Have an annual household income under the localized limits, which ranges from $98,400 to $117,360.


You can check your local income and purchase price limits on the State of Michigan’s website.



How to Apply for the Mortgage Credit Certificate in Michigan?

In order to apply for the MCC MSHDA Tax Credit, home buyers must complete an application and submit it to MSHDA. The application process also requires submitting proof of income, credit report and other documents, which is easily combined with your mortgage application with a licensed Loan Officer. If approved, you will receive an MCC certificate which will be passed along to the lender.




MCC Tax Credit Calculator

In order to determine your potential tax credit amount, you’ll need to calculate 20% of your annual paid mortgage interest.

MCC Tax Credit Amount = (Total Mortgage Amount) × (Interest Rate) × (MCC Percentage)


Here’s a breakdown of the components:

  1.     Total Mortgage Amount: This is the initial amount of your mortgage loan.
  2.     Interest Rate: The annual interest rate on your mortgage loan.
  3.     MCC Percentage: The percentage specified by the MCC program.


Multiply these three values together to get the MCC Tax Credit amount you could potentially claim on your federal income tax return.


Example Tax Credit Calculation

Let’s say you have a $200,000 mortgage with a 6.00% interest rate and MSHDA’s MCC program with a 20% credit rate.


MCC Tax Credit Amount = $200,000 (Total Mortgage Amount) × 0.06 (Interest Rate)
× 0.20 (MCC Percentage) = $2,400


In this example, you could potentially claim an annual tax credit of $2,000 based on the MCC program’s guidelines (which have an upper limit of $2,000), which could be up to $166.67 per month of additional qualifying income.


What Are the Benefits of the Mortgage Credit Certificate Tax Credit?

The primary benefit of the MCC MSHDA Tax Credit is the reduction of the home buyer’s federal income taxes. This tax credit can result in significant savings for the home buyer over the life of the loan and can be used to help with closing costs or other costs associated with purchasing a home.

In addition to the potential reduction of your tax liability, the tax credit can be used as income while qualifying for your mortgage and can lower your debt-to-income ratios. It’s important to note MSHDA income and sales price limitations must be adhered to in order to qualify.

The MCC Credit can be used on Conventional, FHA, VA and RD Loans. All adult borrowers who will occupy the home must apply for the MCC Credit.

Better yet, the MCC Credit may be used each year for the life of the loan, which could be up to 30 years!

Overall, the credit is a great option for homebuyers with tight DTI ratios, while providing additional tax benefit.



What Are the Potential Drawbacks of the MCC MSHDA Tax Credit?

The primary potential drawback of the MCC MSHDA Tax Credit is that it can only be used in the State of Michigan. If the home buyer moves out of state, they will no longer be eligible for the credit.

Additionally, the MCC may only be available to first-time home buyers, so if the home buyer has owned a home in the past three years may not qualify. Additionally, the MCC has certain income limits so if the home buyer’s income exceeds these limits, they may not be eligible.


Get Started With the MCC Tax Credit

Treadstone Funding is a local mortgage lender in Grand Rapids offering the MCC Tax Credit with MSHDA down payment assistance mortgages. To get started or gather more details, get in touch with a licensed Loan Officer!



How to Apply for MCC Tax Credit?

To apply for the MCC Tax Credit in Michigan, you’ll need to get in touch with a licensed Loan Officer at a local mortgage lender to begin a mortgage application—this can be done online or over the phone!

Need to talk to a Loan Officer? We’ll get you in touch.


Is the MCC Tax Credit Worth it?

Yes, especially for buyers who are struggling with meeting debt-to-income ratio requirements on Conventional, FHA, VA, or USDA Loan programs.


What Is an MCC?

MCC stands for Mortgage Credit Certificate, the program available to first-time buyers to reduce their tax liability and increase the mortgage qualification limits.


Subject to credit qualification.  Not all borrowers may qualify.   Rates, terms, and Annual Percentage Rate (APR) are dependent on credit profile, property selected, down payment, and program.   Not a commitment to lend.

Treadstone Funding and its employees are not CPAs or financial advisors. Not financial advice. All information provided is for educational purposes only. Contact a licensed financial advisor and/or tax professional before proceeding.

Not affiliated with the Michigan State Housing Development Authority.

The MCC Tax Credit is a fantastic program that boosts benefits for first-time home buyers.