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First-time homebuyers can keep more money in their pocket by using OHFA MCC (Mortgage Credit Certificate) to lower their taxes.
Borrowers reduce the amount of federal taxes they owe by claiming 40% of their mortgage interest as a tax credit on their tax return. The maximum amount of the tax credit cannot exceed $2,000 per year, and it can be claimed each year for the life of the mortgage loan as long as the home remains the borrower's primary residence.
The tax credit is calculated by: annual mortgage interest X 40%
For example, a borrower with a 5.5% fixed rate 30-year mortgage loan would make approximately $8,200 in interest payments during the first year. 40% X $8,200 = $3,280 so the person is entitled to the maximum $2,000 tax credit.
In addition to the credit earned using OHFA MCC, the borrower is still able to take the standard home mortgage interest deduction but is limited to the mortgage interest paid during the year minus the amount of the tax credit for that year.
For example, if a borrower paid $3,280 of mortgage interest for the year and receives a $2,000 MCC tax credit, the borrower can also deduct $1,280 of mortgage interest from gross income for that year.
No down payment grant is given with the OHFA MCC.
To be eligible under the program, potential homebuyers: