Legislative

Legislative

NYSAR's 2010 Legislative Priorities

From the SONYMA website regarding the first-time homebuyer credit.

Program Features:

Mortgage Credit Certificates ("MCC") issued by SONYMA enables first-time homebuyers to convert 20% of their annual mortgage interest into a direct income tax credit on their Federal Tax Return for each year of the life of their loan;

MCCs can be used with any fixed-rate mortgage product offered by your lender;

Borrowers with MCCs can also take advantage of the $8,000 Federal first-time homebuyer credit (if closed by November 30, 2009);

Potential applicants will be able to estimate the amount of credit they may be eligible for by using SONYMA's MCC Benefits Calculator click here.

Eligible Borrowers must:

Be a first time homebuyer as defined by SONYMA;

Meet SONYMA's Household Income Limit requirements (click here to see Household Income Limits for your area);

Occupy the home as their permanent residence;

Not have used more than 15% of their current residence (or a prior residence) for a business or commercial use in the past year.

Note: If you currently own a residential investment or vacation home and you intend to retain ownership of the home, you will not qualify for a Mortgage Credit Certificate even if you are attempting to purchase a home located in a Target Area.

Eligible Properties must:

Be located in New York State;

Have a sales price that does not exceed SONYMA's Purchase Price limits (click here to see Purchase Price Limits for your area);

Not have been used for any business or commercial purpose;

Be one of the following property types:

1.Existing or newly constructed one family home (includes condominiums and cooperatives);

2.Existing two, three, and four family home that is at least five years old as of the SONYMA loan application date and has been

used only as a residence during the past five years;

3.Two family home located in a Target Area that is newly constructed or was constructed within the five years prior to the

SONYMA loan application date; and

4.Have a maximum of five (5) acres.

Additional Considerations:

The amount of the MCC tax credit cannot exceed the amount of a borrower's annual Federal income tax liability. Unused portions of the credit may be carried forward for up to three (3) years.

Failure to occupy the property will result in revocation of the MCC.

All borrowers are subject to a potential "recapture tax" under Federal law. (Click here for details on recapture tax).

MCC recipients will be required to pay a one time MCC application fee of $250 for mortgages equal to or less than $100,000 and $500 for mortgages greater than $100,000.

Exceptions for Borrowers Purchasing Homes in a Target Area:

Federal law provides certain special incentives for applicants purchasing homes in Federally-designated Target Areas. SONYMA is committed to helping revitalize these neighborhoods.

The incentives are as follows:

The first time homebuyer requirement is eliminated;

Househould Income and home Purchase Prices Limits are higher (See SONYMA's Household Income Limits and Purchase Prices Limits); and

Two family homes that are new constructed or are less than five (5) years old are eligible.

FREQUENTLY ASKED QUESTIONS

Q: What is a mortgage tax credit certificate and how does it work?

A: A mortgage tax credit certificate, known as an MCC, can be used to reduce your household's tax burden every year for the life of your mortgage loan. With an MCC, 20% of what you pay in mortgage interest becomes a tax credit that you can deduct dollar for dollar from your Federal income tax liability. The remaining 80% of your mortgage interest continues to qualify as an itemized tax deduction, as long as you have sufficient Federal tax liability.

Q: How is the mortgage tax credit calculated?

A: For example, if you have a $200,000 mortgage and pay 5.5% in interest you would pay $10,933 in interest in the first year of your mortgage. You can claim 20% of the interest, or $2,186, as a direct tax credit. This will free up $183 per month to help you make your loan payments. Keep in mind that each year the amount of interest you pay on the loan will decrease slightly, which means your mortgage credit will be reduced slightly each year.

Q: How much can I save with an MCC?

A: Actual savings will vary depending on each borrower's Federal tax situation, but the average homebuyer will likely save about $125 a month - or more than $1,500 a year.

Q: How do I know if I qualify for an MCC?

A: To qualify for an MCC, you must meet SONYMA's income limits and the sales price of your prospective home must be within our sales price limits. The limits vary by county, household size and property type. Check income and sales price limits on our web site. To qualify for an MCC, you must also meet one of the following criteria:

Be a first-time homebuyer - someone who has not owned or had an ownership interest in his/her principal residence in the last three years, or Purchase a home in a "Target Area", which is an economically distressed area designated by the U.S. Department of Housing and Urban Development (HUD), (download New York State's Target Areas from our web site), or

Be a military veteran who has received an honorable discharge.

AND

Occupy the property you are buying as your primary residence for every year you claim the MCC. If the property ever ceases to be your primary residence, SONYMA may revoke your MCC approval.

AND

Have received a mortgage commitment from an eligible lender.

In addition, your loan must:

Be a new mortgage loan. You cannot obtain an MCC if you are refinancing an existing mortgage loan.

AND

Be a fixed-rate loan - you may choose the fixed-rate loan that best meets your needs.

Q: How do I apply for an MCC?

A: SONYMA is making available up to $20 million in MCCs. You can apply for an MCC when you apply for a mortgage loan at any of our participating lenders.

To find a participating lender, go to our website by clicking here. Lender's requirements and fees will vary. The lender you choose can help you understand your options.

Q: Can an MCC be combined with other SONYMA mortgage products?

A: No. The Internal Revenue Service does not permit SONYMA to issue an MCC for mortgages it funds with mortgage revenue bonds. That means borrowers who obtain a SONYMA mortgage to purchase a home are not eligible for the MCC program.

Q: What properties are eligible for an MCC?

A: Eligible properties include one- and two-family homes, condos and co-ops and existing three- and four-family homes. (Two-family new construction must be located in a SONYMA Target Area.)

Q: Is there a way to estimate how much my actual credit would be?

A: SONYMA created an MCC Benefits Calculator that is available on our web site, by clicking here. This calculator can help you determine your potential MCC benefit from the information you input.

Q: Can I still use the Federal homebuyer tax credit (up to $8,000) announced as part of the U.S. American Recovery and Reinvestment Act of 2009?

A: Yes. If you obtain an MCC, you can take advantage of both the Federal tax credit and the 20% mortgage tax credit offered by the MCC. The Federal tax credit is available for homes closed on or after January 1, 2009 and before December 1, 2009.

Q: Is a tax credit the same as tax deduction?

A: No. A tax credit is a dollar-for-dollar reduction in what you would owe in Federal taxes. That means you would owe nothing to the IRS if you owed $2,000 in taxes and were eligible for an MCC of $2,000. On the other hand, a tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume you were in the 15% tax bracket and owed $2,000 in taxes. If you received a $2,000 tax deduction, your tax liability would be reduced by $300 (15% of $2,000), or lowered from $2,000 to $1,700.

Q: What happens if I sell my home and I have an MCC?

A: If you received a Mortgage Credit Certificate from SONYMA when you purchased your home, you may be required to pay the IRS what is known as the Federal recapture tax if you owned your home for less than 10 years.

The Federal Recapture tax may apply because homeowners who receive an MCC may be required, in limited circumstances, to repay a portion of their gain upon sale or transfer of their home. This enables the federal government to collect, or "recapture", all or a portion of the benefit received from the MCC if a homeowner does not occupy the home for up to nine years after it is purchased. However, SONYMA will reimburse its MCC certificate holders who become liable for the tax after they sell or otherwise dispose of their home. Any homeowner issued an MCC by SONYMA who pays the Federal recapture tax is eligible for reimbursement.

Q: How long will I have the mortgage tax credit?

A: The MCC will be in effect for the life of the mortgage so long as the residence remains your principal residence. Each year, the mortgage tax credit will be calculated on the basis of 20% of the interest paid on your mortgage loan that year. In order to maintain the MCC, you must file IRS Form 8396 with your Federal income tax return. The form can be obtained from the IRS website at www.irs.gov.

Q: Where I can learn more about the MCC?

A: Visit our website: www.nyhomes.org or call us at (800) 382-HOME (4663).