Mortgage Credit Certificates

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DEFINITION of 'Mortgage Credit Certificates'

A certificate provided by the originating mortgage lender to the borrower that directly converts a portion of the mortgage interest paid by the borrower into a non-refundable tax credit. Mortgage credit certificates can be issued by either loan brokers or the lenders themselves, and are typically available only to low- or moderate-income buyers. These certificates are designed to help first-time homebuyers qualify for a home loan by reducing their tax liabilities below what they would otherwise have to pay.

INVESTOPEDIA EXPLAINS 'Mortgage Credit Certificates'

Procedurally speaking, mortgage credit certificates are applied for with the originating lender after the purchase contract has been signed, but before the time of closing. A non-refundable fee is charged for this service by the party administering the program. The state or local approval that is granted can be valid for up to 120 days and is usually transferable to another property if the current loan does not close.

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RELATED FAQS
  1. Can I get a tax credit from conducting research and development?

    It is possible for a company to qualify for a research and development tax credit for conducting research and development. ... Read Full Answer >>
  2. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  3. In what instances does a business use closed end credit?

    The most common types of closed-end credit used by both businesses and individuals are mortgages and auto loans. Businesses ... Read Full Answer >>
  4. What are the long-term effects of delinquent accounts?

    Delinquency occurs when borrowers fail to make payments on their loans. All loan borrowers should do their best to avoid ... Read Full Answer >>
  5. How was the American Dream impacted by the housing market collapse in 2008?

    The American Dream was seriously damaged by the housing market collapse in 2008. In many ways, the American Dream is a self-fulfilling ... Read Full Answer >>
  6. How much risk is associated with subprime mortgages?

    A large amount of risk is associated with subprime mortgages. Since the mortgages are specifically for people who do not ... Read Full Answer >>
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