State Spotlight: The Alabama Mortgage Credit Certificate (MCC)

If you are a first-time home buyer in the state of Alabama, you might qualify for the Mortgage Credit Certificate program. In short, the MCC tax credit allows you to take advantage of up to $2000 of non-refundable tax credits each year for the life of your mortgage loan. 

In order to help you better understand how the program works in Alabama, we've looked at your program's lead - the Alabama Housing Finance Authority (AHFA.)
 
Qualifying for the MCC Tax Credit in Alabama         
There are specific guidelines you need to meet in order to be eligible for a Mortgage Credit Certificate in Alabama.

• You are a first-time homebuyer or have not owned a home in the last three years
• You will purchase a new construction or pre-built home (refinancing is not an option)
• You will occupy it as your primary residence within 60 days of the closing
• You meet the federally established income and sales price limits
• You will use a participating lender for an amortizing loan
• You meet any other requirements that may apply as determined by AHFA

 
If not qualified above, those purchasing homes in specific "target" areas in Alabama may be eligible for the MCC Tax Credit. Talk to their lender to determine if you could qualify.
 
How Does the MCC Mortgage Credit Certificate Alabama Work?
While each state runs its own version of the program, there are similarities between many states, and Alabama is no exception. In Alabama, participants in the MCC Tax Credit program are able to reduce the amount of federal income taxes they owe each year by a pre-determined percentage of their paid mortgage interest. 

Any interest paid outside of the allowed amount can also be claimed as a deduction on the homebuyer's federal tax return. If participants would like to realize immediate savings using the program, they can update their withholdings on their W-4 form. The Alabama Mortgage Credit Certificate (Alabama MCC or Alabama first-time homebuyer program) can be used in conjunction with the state's Step-Up program or any 30-year, fixed-rate, amortizing mortgage through an approved lender.
 
How Much Can A Qualified Homebuyer Save?
In Alabama, the mortgage credit rate percentages are based on the loan amount:

• 20% Mortgage Credit Certificate Tax Credit for loans of $150,001 or greater: no cap
• 30% Mortgage Credit Certificate Tax Credit for loans of $100k001 to $150,000: $2000/year cap
• 50% Mortgage Credit Certificate Tax Credit for loans of $100,000 or less: $2000/ year cap

 
Other Programs Available to Homebuyers in Alabama:
In addition to the MCC Mortgage Credit Certificate program, Alabama also offers the Step Up Program, designed to help moderate-income homebuyers who can afford a house payment but need help with the down payment. This program allows homebuyers to secure a second 10-year mortgage for their down payment, in addition to their 30-year mortgage. Both mortgages are serviced by ServiSolutions and will therefore provide an easy, combined payment each month. The AHFA provides additional guidelines for the program here.

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