Texas Mortgage Credit Certificate Program

The Texas Department of Housing and Community Affairs created its Texas Mortgage Credit Certificate Program for the residents of Texas, to help make ownership of new and existing homes more affordable for individuals and families of low and moderate income, especially first time buyers.

What is a Mortgage Credit Certificate? A Mortgage Credit Certificate allows the homebuyer to claim a tax credit for some portion of the mortgage interest paid per year. It is a dollar for dollar reduction against their federal tax liability
Note: The Mortgage Interest Credit (MCC) is a non-refundable tax credit, therefore, the Homebuyer MUST have tax liability in order to take advantage of the tax credit.

Who is eligible to receive an MCC? The program is open to those individuals and families who:

  • meet income and home purchase requirements;
  • have not owned a home as primary residence in the past three (3) years;
  • meet the qualifying requirements of the mortgage loan;
  • will use the home as their principal/primary residence.  
Note: The MCC may not be used in connection with the refinancing of an existing loan. Targeted Areas – first time homebuyer requirement is waived; increased income and purchase price limits. 

Veteran’s Exemption
The Veteran’s Exemption gives those who served a chance to save. As a military veteran you protected the American Dream. Now is your opportunity to live it. If you served in active duty and were honorably discharged as evidenced by Form DD-214, and you have not previously had a mortgage financed through a mortgage revenue bond program, you are exempt from the first time homebuyer requirement. You must still meet the applicable acquisition and purchase price limit requirements of a non-targeted area unless purchasing in a targeted area census tract.

How much of a tax credit can be issued under the MCC program? 
The size of the annual tax credit will be 40% of the annual interest paid on the mortgage loan. However, the maximum amount of the tax credit shall not exceed $2,000 per year. The credit cannot be larger than the annual federal income tax liability, after all other credits and deductions have been taken into account. MCC credits in excess of the current year tax liability may, however, be carried forward for use in the subsequent three years. 

MCC Example: 
MCCs are issued directly to qualifying Applicants who are then able each year to take a tax credit equal to a specified percentage of the interest paid on their mortgage not to exceed $2,000. The Mortgage Credit Certificate rate is 40 percent. Thus, an Applicant with a $121,000.00 mortgage (30 year fixed with equal monthly installments of principal and interest) would realize the following savings: 
MCC Example 
Mortgage Amount: 
Annual Percentage Rate:
Total Interest Paid First year:
$ 6,500.00
Mortgage Credit Certificate Rate:
X .40
Tax Credit Amount: 
$2,000 (max) 
During the first year of the Program, this Applicant would be entitled to a tax credit of $2,000.00. Based upon such entitlement, he or she would be able to file in advance a revised W-4 withholding form taking into consideration this tax credit and have approximately $167.00 per month in additional disposable income. Additionally, taxpayers who file itemized returns may take a deduction for their mortgage interest paid each year, less an amount equal to the tax credit taken. (In the above example, the additional interest deduction would be $5,872.50.00 less $2,000.00, or $3,872.50) 

Texas MCC Program Criteria / Requirements: 
All mortgage loan types are eligible. The mortgage loan, available through a network of participating lenders, must be underwritten according to FHA, VA, USDA/RHS or conventional loan criteria and will be at prevailing market rates. New and existing single family homes, townhouses, condominiums and manufactured housing (with certain restrictions) are eligible properties. Purchase price and income limits, adjusted by household size apply. The homebuyer must also occupy the property as their principal residence. 

Tax Credit versus Tax Deduction:
A mortgage interest deduction differs from a mortgage tax credit in a number of ways. For example, all homebuyers, regardless of income, may take a mortgage interest deduction, whereas mortgage tax credits are available only to holders of MCCs. 

Length of Benefit: 
Each year, the mortgage tax credit will be calculated on the basis of 40% of the total interest paid on the mortgage loan that year. The MCC will be in effect for the term of the mortgage loan, so long as the residence remains the principal residence. In order to maintain the MCC the homebuyer can adjust their withholdings on their W-4 form with their employer and must file IRS Form 8396 with their federal income tax return. The form can be obtained from the IRS web site at www.irs.gov. 

Targeted Areas: 
In accordance with program guidelines, the Texas Mortgage Credit Certificate Program has funds set aside for targeted area loans. A Targeted Area is a census tract in which 70% or more of the families have incomes that are 80% or less of the statewide median income or an area of chronic economic distress. Homebuyers purchasing properties located in Targeted Areas do not have to be a first time homebuyer and purchase price and income limits are generally higher. For a list of Targeted Area census tracts identified by county, please refer to the following list. Your lender or REALTOR® should be able to verify whether the property you are considering for purchase is located within a Targeted Area census tract. To find your census tract, use the GeoCoding tool at http://www.ffiec.gov/geocode/. Targeted Area Census Tracts by County (PDF) 

Homebuyer Education Requirement:
Homebuyer must complete a pre-purchase homebuyer education course prior to loan closing. Get a list of certified homebuyer education providers in your city/county. Online homebuyer education is acceptable. Certificate of Completion required.

Other Costs/Fees:
In addition to the regular closing costs associated with the loan, there is a MCC Issuance Fee of 1% of the loan amount, due upon closing. Fees may vary. Please check with lender for current applicable fees.

Loans made in this program are subject to recapture tax provisions, under federal law. Read more in the Understanding Recapture brochure (PDF). 

I was issued an MCC by TDHCA; can I refinance my mortgage loan? 
If TDHCA issued your MCC you will need to fill out the refinancing application. Upon review of the information, TDHCA will reissue you a new certificate. For more information click on the form Refinancing of MCC Loan Application. Refinancing of MCC Loan Application (PDF). 

What happens if I lose or misplace my MCC? 
Please contact Dina Gonzalez at 512-475-3993 for a replacement certificate. There is a $50.00 fee for this service. 

 This program may change for more up to date information Click Here to go to the Texas MCC website

*30-year fixed annual percentage rate loan with 5% down payment on a $120,000 loan. Effective 9/17/13. Offer may terminate at any time without notice. Rate and annual percentage rate (APR) calculated on a 365 day year with mandated closing costs (2% origination and $400 program related fees). Rates/APRs subject to change with changes in closing costs. Properties and applicants must qualify. Other restrictions may apply. 221 E. 11th Street, Austin, Texas 78701, 800-792-1119.