First Time Home Buyer Program
The City of Sycamore participates in a first time home buyer program sponsored by the Illinois Housing Development Authority. The program allows qualified first time home buyers a credit against their federal income tax liability. Please contact your local lender or the IHDA (Keith Pryor @ 312-836-7348) for more information.
The I-Loan Certificate (Mortgage Credit Certificate, a.k.a. MCC) allows first-time homebuyers to receive a dollar for dollar reduction in federal income taxes of 20 percent of their mortgage interest. This reduction is in addition to the standard income tax deduction available when purchasing a home. Please keep in mind that the I-Loan Certificate is not a loan in and of itself. It is a tax credit.
The I-Loan Certificate (MCC) offers homebuyers flexibility in working with lenders. MCCs can be used in conjunction with any type of mortgage loan, such as a conventional fixed-rate, adjustable-rate, balloon rate, conventionally insured or government insured. It works with FHA and VA loans, so buyers can choose the type of loan that best meets their needs and still reap the benefits of a I-Loan Certificate. The only exception to this that an MCC cannot be used with an IHDA loan.
Reservations are made in the same manner as with our Mortgage Revenue Bond (MRB) program. The underwriting on the loan is entirely up to the lender and the lender’s investor.
Program Highlights: This program is offered annually in selected areas of the state and is typically announced in early summer. It is a tax credit, which allows borrowers to reduce their federal income tax liability by up to $2,000 per year. Borrower’s must be first-time buyers and meet certain income limits and purchase price limits for the home they are seeking to purchase.
To understand the benefit of an MCC, let’s look at a first-time buyer with a $40,000 annual income, purchasing a $95,000 home at a 7.50 percent interest rate. On a 30-year fixed-rate loan, the buyer would normally pay up to $7,125 in mortgage interest each year. With an MCC, the buyer can receive 20 percent (or a $1,425 credit) off their yearly federal income tax burden, while maintaining a standard mortgage interest deduction of the remaining 80 percent each year. This $1,425 can lessen the amount owed on one’s annual income taxes or be applied directly to one’s monthly mortgage payment, lowering it by $118.75 each month. This can save the buyer more than $42,750 over the life of the loan.
An I-Loan Certificate is good for the life of the loan if the original borrower stays in the house. The certificate can even be reissued, subject to certain conditions, if the homebuyer chooses to refinance.
Property which can be purchased include:
- single-family homes
- condominium units
Application Process: Homebuyers can check with their local lenders to see which ones offer the I-Loan Certificate program. Lenders must be a bank, savings and loan association, credit union or mortgage banker. Lenders also must be in good standing and be licensed to do business in Illinois. Mortgage brokers are not eligible to participate.
Relationship & Fees: The lender may charge its usual and customary fee structure. In addition, the lender may charge an MCC application fee of $100, which the lender retains, and a $250 fee at closing, which is forwarded to IHDA. In this program, IHDA does not purchase the loans. It only provides a tax credit to the borrowers.
Servicing: There are no servicing requirements for an MCC. There is an annual report, which must be submitted to the IRS and which IHDA will provide to the lender with the form and information at the end of the year. The lender needs only to verify the accuracy of the information.