There’s a big conversation in the Senate about the Mortgage Tax Credit – and it doesn’t look like that “National” initiative is going too far… Good News! There is a First Time Home Buyer Tax Credit 2013 already in place in North Carolina.
The First Time Home Buyer Tax Credit 2013 is offered through the NCHFA and is a Mortgage Credit Certificate that could help you feel a little better about those recently rising mortgage interest rates… because it could save you money each month you own a home!
With the NC Affordable Housing / NCHFA Program we can issue a Mortgage Credit Certificate MCC to everyone who qualifies. Basic qualifications include credit scores of at least 640 and maximum income that varies by how many people you have in your home and what county you want to buy a house in.
You don’t have to be a First Time Home Buyer, you can not have owned a home in the last 3 years, and you must live in NC.
This relatively unknown tax credit for qualifying first time buyers (or folks who have not owned a primary residence for the past 3 years), involves income verification as mentioned above, but there are no limits on the sales price – so as long as you qualify, there’ no definitive sales price restriction.
How the NC First Time Home Buyer Tax Credit 2013 Works
If you purchase an existing home, every year 20% of what you pay in mortgage interest equates to a tax credit. Each state offers this program, and dictates a percentage but in North Carolina the credit is 20%. If you use our typical scenario example of a $240,000 loan amount at 4.50% the credit the first year would be approximately $2600! It’s actually capped at $2,000. If you purchase a New Home, that has not been lived in during the past 12 months, you can get a credit of up to 50%, which is capped at the $2,000 mark.
These are real dollars. Money that you would otherwise pay in taxes. The credit diminishes very slightly each year as you pay less interest but the savings over the first five years could be over $10,000!
In addition, 80% of the interest you pay each year equates to a write off. Your property taxes and mortgage insurance are also write offs. The average savings will be another $330 a month, $3,968 a year! This one also diminishes slightly each year as your loan pays down and you pay less interest. ( This is the part that the lawmakers in Raleigh are talking about potentially doing away with.)
So in this scenario the credit and write off combined nets approximately $540 a month for the borrower. For an FHA loan, we can add these savings into your income so raising the monthly income the lender uses to determine the loan amount available to you.
We close several of these loans every month – so whereas some loan officers might not know how the program works – we do. You can increase your deductions with your employer so you take the benefits home each month in your pay check instead of waiting for your tax refund. So in this scenario the borrower takes home $546 a month more than if they were renting and, qualifies for a larger loan, bigger home!
Another tax benefit for you is the ability to write off some of the costs of securing your loan such as points, prepaid taxes and prepaid interest. Your first year of home ownership, you can also write off these items from your closing statement even if they were paid on your behalf (by the Seller, for instance). Property taxes are also deductible come April 15. If you live in a town where property taxes are in the double digits this should be a substantial write off.
You can also write off PMI as long as you took your mortgage out after 2007, and it’s not a rental property, and you:
Your adjusted gross income is no more than $109,000. The deduction begins to phase out once your adjusted gross income (AGI) exceeds $100,000 ($50,000 for married filing separately) and disappears entirely at an AGI of more than $109,000 ($54,500 for married filing separately).
Have more questions about buying a house in NC and how the NC First Time Home Buyer Tax Credit 2013 works? Call Steve and Eleanor Thorne 919 649 5058 – we’d love to help you make your dreams of homeownership come true!