Arkansas Mortgage Credit Certificate Program

The Arkansas Mortgage Credit Certificate (MCC) Program is a state-supported initiative designed to provide eligible homebuyers with a federal income tax credit, reducing their overall tax liability and increasing their ability to afford a home. This program is a valuable resource for first-time homebuyers and others who qualify.

Benefits

Offers a federal income tax credit equal to a portion of the annual mortgage interest paid by the homeowner, up to a maximum benefit of $2,000 per year.
Increases the buyer's disposable income, which can be used for mortgage payments or other expenses.
Can be combined with other Arkansas homebuyer assistance programs, such as the ADFA Move-Up Loan Program or Down Payment Assistance initiatives, for additional financial support.
Provides long-term savings over the life of the mortgage, making homeownership more affordable.

Eligibility Requirements

Available to first-time homebuyers, defined as individuals who have not owned a primary residence in the past three years, with exceptions for certain targeted areas.
Income limits apply, varying based on household size and the location of the property.
The property must be located in Arkansas and used as the buyer's primary residence.
Applicants must meet credit and underwriting requirements established by participating lenders.
A homebuyer education course is required to ensure participants are prepared for homeownership.

Additional Information

The Arkansas Mortgage Credit Certificate Program is administered by the Arkansas Development Finance Authority (ADFA) and is intended to make homeownership more attainable for eligible residents. By providing a direct federal tax benefit, the program lowers the financial barriers to purchasing a home and supports long-term financial stability for Arkansas homeowners.

Frequently Asked Questions About Our Program

What is the Arkansas Mortgage Credit Certificate (MCC) Program?

The Arkansas Mortgage Credit Certificate (MCC) Program, offered by the Arkansas Development Finance Authority (ADFA), provides eligible first-time homebuyers with a federal income tax credit of up to $2,000 annually. This credit reduces the amount of federal income tax owed, effectively increasing the homebuyer's take-home pay and making homeownership more affordable.

Who is eligible for the MCC Program?

Eligibility for the MCC Program requires applicants to be first-time homebuyers, defined as individuals who have not owned a principal residence in the past three years. Exceptions are made for veterans and buyers purchasing homes in targeted areas. Additionally, applicants must meet income and purchase price limits, which vary by county and household size.

How does the MCC tax credit work?

The MCC allows homeowners to claim a tax credit equal to 50% of the annual mortgage interest paid, up to a maximum of $2,000 per year. This credit directly reduces federal income tax liability, resulting in substantial savings over the life of the loan.

Are there income limits for participating in the MCC Program?

Yes, the program imposes income limits that vary based on household size and the county where the property is located. For example, in certain areas, the income limit for a one- to two-person household is $75,000, while for a three or more person household, it is $85,000.

What are the purchase price limits under the MCC Program?

The purchase price of the home cannot exceed $425,000. This limit ensures that the program assists in purchasing modestly priced homes suitable for low- to moderate-income buyers.

Is homebuyer education required for the MCC Program?

While the program details do not specify a mandatory homebuyer education course, it is generally advisable for first-time homebuyers to complete such a course to better understand the responsibilities of homeownership and the mortgage process.

Can the MCC be combined with other ADFA programs?

Yes, the MCC Program can be combined with other ADFA programs, such as the Move-Up Loan Program, to further enhance affordability for homebuyers.

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How do I apply for the MCC Program?

To apply, contact an ADFA-approved lender who will guide you through the application process, including verifying eligibility, assisting with necessary documentation, and explaining program requirements.

Is there a fee associated with obtaining an MCC?

Yes, there is a non-refundable fee for processing the MCC application. The exact amount may vary, so it's advisable to discuss this with your lender.

Can I use the MCC with any type of mortgage loan?

The MCC can be used with various types of mortgage loans, including fixed-rate and adjustable-rate mortgages. However, the first mortgage loan must be a fixed-rate, fully amortizing loan. It's important to confirm with your lender that your loan type is compatible with the MCC Program.

What happens if I refinance my mortgage?

If you refinance your mortgage, you may be eligible to reissue your MCC to continue receiving the tax credit. Specific conditions apply, so it's important to consult with your lender or ADFA for guidance.

Are there any residency requirements for the MCC Program?

Yes, the property purchased must be located within the state of Arkansas and serve as your primary residence.

Is the MCC benefit transferable if I sell my home?

No, the MCC benefit is not transferable. If you sell your home, the certificate becomes void. The new buyer would need to apply for their own MCC if they meet the eligibility requirements.

How long does the MCC benefit last?

The MCC benefit lasts for the life of the original mortgage loan, provided you continue to occupy the home as your primary residence and retain the original financing.

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Can I claim the MCC tax credit every year?

Yes, you can claim the MCC tax credit each year for as long as you pay mortgage interest on the loan and occupy the home as your primary residence.

What if my tax liability is less than the MCC credit?

If your tax liability is less than the MCC credit, you can carry forward the unused portion of the credit for up to three subsequent tax years.

Are there any recapture tax provisions?

Yes, if you sell your home within nine years and your income has increased significantly, you may be subject to a recapture tax. However, certain conditions must be met for this tax to apply.

Can I use the MCC for a second home or investment property?

No, the MCC Program is intended for primary residences only. Second homes and investment properties are not eligible.

Is there a deadline to apply for the MCC Program?

There is no specific deadline to apply for the MCC Program. However, program availability is subject to funding, so it's advisable to begin the application process as soon as you are ready to purchase a home.

How does the MCC affect my mortgage application process?

The MCC can increase your net income by reducing your tax liability, which may improve your debt-to-income ratio. This can enhance your mortgage application and potentially allow you to qualify for a larger loan amount.