California Tax Credit for first time homebuyers

Purchasing a home is perhaps one of the most exciting times in your life, but it can also be a time that is full of stress as well. It truly depends upon your perspective, and the type of assistance that you are able to get along the way.

For many people, being a first-time homebuyer is fulfilling the dream, and you might be surprised to learn that now is one of the best times to do it in the state of California. Real estate values have been increasing but those numbers are expected to slow down. The slowdown in the market will likely give rise to additional inventory, making it possible for you to find the home that is right for you.

One of the benefits of purchasing a home for the first time is that the California Housing Finance Agency is offering a mortgage credit certificate for first-time homebuyers. It is known as the MCC program, and in essence, it allows first-time homebuyers to convert part of their mortgage interest into a credit that will appear on their tax returns.

Although this tax credit occurs on a statewide basis, as it is part of a California program, it is actually a federal tax credit. What are some of the benefits and particulars of this program to understand before you jump in with both feet and began on the road to home ownership?

If there is one thing that most young couples could use, it is additional income. CalHFA’s MCC is not going to increase the amount of money that you make at your current job but it will effectively increase the amount of money that you have in your pocket at the end of the year. The dollar for dollar credit that you receive reduces your federal tax liability, which would make a difference in how much of your income you are able to keep.

Since the tax credit is going to effectively increase your spendable money, it may also be easier for you to qualify for a home loan. When the time comes, you can even apply for the loan directly on our website and at that point, the appraisal can be ordered for your new home. It should be noted, however, that the IRS may make you repay some of the MCC tax credit if you sell your home within 9 years.

There is sometimes some confusion over who are first-time homebuyers in the state of California. According to the MCC definition, a first-time homebuyer is somebody who has not owned a primary residence for at least three years. You may need to supply three years’ worth of tax returns to prove that you have not claimed mortgage interest deduction during that time.

The state of California wants to make it as easy as possible for first-time homebuyers to get the home they desire. There may even be additional assistance available, including the California Homebuyers Down Payment Assistance Program that can work along with the MCC. Give us a call and we can help you to see the possibilities.

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