There’s no doubt that the recent $8000 Federal Tax Credit stimulated real estate purchases and gave ordinary folks, rather than Big Bank tycoons, a break for a change. And just as soon as the credit expired last April, the market sank back into the doldrums. But prospective purchasers in Portland can take advantage of a little-known tax credit that far surpasses the recently-hyped national program. Read on if you are a first-time homebuyer ready to purchase within the city limits or you are a seasoned borrower interested in buying in the Interstate Corridor of North/Northeast Portland. This program might be for you.
The Mortgage Credit Certificate Program offered by the Portland Housing Bureau, is a federal tax credit equal to 20 percent of the annual mortgage interest paid by the homebuyer. The remaining 80% of the mortgage interest remains deductible and the entire program stays in place for the life of the loan.
For example, on a $250k purchase with a 5% interest rate, an approved buyer would save over $200/month. Unlike the recent one-time credit, buyers using the MCC obtain benefits that last the life of their loan. In just over 3 years they would save more than the $8000 First Time Homebuyer Tax Credit. And the savings over the 30 year life of the loan would be $75,000! The other 80% of the annual interest paid is still deductible on the federal tax return each year.
Eligible homebuyers for this program must meet the following criteria:
- First-time homebuyer, defined as not having owned in the past three years. (This requirement is waived if the property is located in an MCC Target Area.)
- Annual borrower income must be at or below:
- $71,200 for a one or two person household
- $81,880 for a 3 or more persons household
- Must meet first mortgage lender’s criteria for underwriting, credit and down payment.
- Must occupy the property as a principal residence within 60 days of purchasing
- Must complete a HUD-certified homebuyer education course prior to loan closing.
This is a wonderful program for many who have been priced out of the market in Portland in recent years. With interest rates at historic lows and sellers ready to bargain, there have never been better conditions for first-timers. The MCC is one more reason to start the pre-qualification process on the path to home-ownership.