Mortgage Credit Certificates
A federal tax credit for part of the mortgage interest you pay. Underwriting can count it as income, which means it does not just save you money later, it can help you qualify now.
Quick answer
Saxton Mortgage does. At least one FHA program we offer lets the certificate count as income or offset the mortgage payment before qualifying ratios are calculated, and at least one conventional program adds the maximum possible credit to your income. At least one VA program we offer also accepts it, with a copy of the certificate in the loan package. Not every program allows it, and at least one program we offer lists it as not eligible.
A tax credit that helps you qualify
Most buyer assistance helps with cash. This one helps with income.
- A mortgage credit certificate lets an eligible first-time buyer claim a federal tax credit for a specified percentage of the mortgage interest paid, usually somewhere in the twenty to twenty-five percent range.
- Guidelines allow the tax credit amount to be treated as qualifying income.
- On one government program it can be counted as income or used to offset the mortgage payment before the ratios are calculated.
- Agency guidance directs that the maximum possible credit be added to your income rather than subtracted from your payment.
- Certificates are accepted on FHA, VA, and conventional financing across the product profiles we work from.
- They are issued by state and local governments, not by lenders. Your loan officer works with the certificate; the agency issues it.
Federal tax credit
Treated as qualifying income
FHA financing
VA financing
Conventional financing
Issued by state and local agencies
How It Changes Your Numbers
Two different mechanics, and which one applies depends on the program.
The credit is calculated from your loan amount, your note rate, and the certificate percentage, divided across twelve months. That monthly figure is what enters the calculation. Agency guidance is specific that when computing your debt-to-income ratio, the maximum possible credit should be treated as an addition to your income rather than a reduction to your mortgage payment. Those two approaches produce different ratios, so the instruction matters.
One government program is more flexible, allowing the certificate to be considered acceptable income or used to offset the mortgage payment before qualifying ratios are calculated. On VA financing, the lender provides a copy of the certificate with the loan package showing the percentage used to calculate the credit and the amount of certified indebtedness.
The documentation ask is light. A copy of the certificate and the lender’s documented calculation in the file is what guidelines specify. The harder part is upstream: you have to obtain the certificate from the issuing agency, and that generally has to happen in coordination with your loan, not after it closes.
What to know before you count on one
Six things worth understanding.
It Is A Credit, Not Cash
Down payment assistance gives you funds. A mortgage credit certificate gives you a tax credit and, in underwriting, additional income. They solve different problems and can sometimes be combined.
Timing Is The Hard Part
Certificates come from state and local housing agencies with their own applications, income limits, purchase price limits and availability. That process needs to start early, alongside the loan, not after.
It Is Generally For First-Time Buyers
Agency language describes it as enabling an eligible first-time home buyer to obtain a mortgage on a principal residence. Program-specific exceptions exist at the issuing agency level.
Not Every Program Accepts It
Most do, but at least one non-agency program lists mortgage credit certificates among income sources that are not allowed. Program selection matters.
The Calculation Method Affects Your Ratio
Adding the credit to income versus subtracting it from the payment produces different debt ratios. Agency guidance directs the income treatment, and getting this right can change your approved loan amount.
The Benefit Continues After Closing
Unlike a one-time assistance payment, the credit applies each year you hold the loan and occupy the home, subject to the terms of your certificate and the tax rules that apply to you.
Hear From Homeowners Like You
Frequently Asked Questions
Questions about mortgage credit certificates.
Saxton Mortgage does. At least one FHA program we offer lets the certificate count as income or offset the mortgage payment before qualifying ratios are calculated, and at least one conventional program adds the maximum possible credit to your income. At least one VA program we offer also accepts it, with a copy of the certificate in the loan package. Not every program allows it, and at least one program we offer lists it as not eligible.
A mortgage credit certificate, or MCC, is issued by a state or local government and lets an eligible first-time homebuyer take a federal tax credit equal to a set share of the mortgage interest paid, usually 20% to 25%. The mortgage has to be on your principal residence.
Yes, Fannie Mae’s guide counts the maximum possible MCC credit as added monthly income when your DTI ratio is calculated. The amount is the mortgage amount times the note rate times the MCC percentage, divided by 12.
You get an MCC from the state or local agency that issues it, since states and municipalities can issue MCCs in place of, or as part of, their mortgage revenue bond authority. We then place the certificate and the income calculation in your loan file.
Yes, FHA counts MCC income as effective income using the current subsidy rate, and VA requires a copy of the MCC showing the credit percentage and the certified indebtedness. On VA loans, a credit percentage above 20 percent carries an annual limit of $2,000 or your maximum tax liability, whichever is less.
The guides we use handle the two separately: an MCC is counted as income, and down payment assistance is permitted on FHA loans under FHA’s own rules at one program*. Whether a housing agency lets you use both its MCC and its assistance is that agency’s call, so we confirm with the issuer.
On a purchase, Fannie Mae requires a copy of the MCC and the lender’s documented calculation of the income adjustment. On a refinance, the MCC provider must confirm before closing that the certificate remains in effect for the new loan, and the file needs the reissue certification.
Yes, one program in our lineup lists mortgage credit certificates among the loan features it will not accept*. Fannie Mae, Freddie Mac, FHA and VA each have written rules for counting the credit.
When people say mortgage certificate they almost always mean a mortgage credit certificate, often shortened to MCC. It is a federal tax credit for part of the mortgage interest you pay, and it is issued by a state or local housing finance agency rather than by your lender. We do not issue it and no lender does.
It works as a credit against the tax you owe rather than as a deduction from your taxable income, which is why a credit is worth more than a deduction of the same size. That is also why underwriting can treat it as qualifying income: it changes your monthly picture, not just your April one.
Find out what you qualify for
If you are a first-time buyer, it is worth finding out whether your state or local agency offers a certificate before you lock anything in. Tell us where you are buying and we will help you sequence the certificate application alongside the loan so the income can actually be counted.
Get Pre-QualifiedMortgage credit certificates are issued by state and local government agencies, not by Saxton Mortgage, and eligibility, credit percentages, income limits and purchase price limits are set by the issuing agency. Acceptance and calculation treatment vary by loan program and investor and are subject to change. At least one program does not permit this income source. Saxton Mortgage does not provide tax advice; consult a tax professional regarding your own situation. Not all applicants will qualify. This is not a commitment to lend.