Lenders apply for an MCC on the borrower’s behalf during the mortgage application process. The MCC application fee can be financed and quickly recovered by the $2,000 annual cash benefit. As described by MCC administrator Montana Housing, “the MCC allows eligible homebuyers to receive a dollar-for-dollar reduction in their federal income taxes of up to 20% of the annual interest paid on their mortgage [subject to a $2,000/year maximum]. Borrowers can file an amended withholding statement with their employer, and increase their monthly take-home pay by the amount of the credit. This additional income can be used to help qualify a borrower for a loan. The MCC can be attached to any loan statewide, except for a loan financed through any other Montana Housing Program.”
Once borrowers qualify for and receive an MCC, the tax credit value will be calculated based on the interest paid on the mortgage loan that year. The MCC will be in effect for the life of the original mortgage loan, so long as the home remains the principal residence of the homebuyer.