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Mortgage Credit Certificates

QUICK SUMMARY

A mortgage credit certificate, or MCC, is a federal tax device issued by a housing agency. It turns a portion of mortgage interest into a tax credit instead of only a deduction. It is not cash at closing. It is not the 2008 to 2010 first-time buyer credit. Whether any Texas or local issuer is currently offering one is a program question with a yes-or-no answer that changes. This article explains the idea and does not claim a Fort Worth certificate is open.

A Mortgage Credit Certificate, or MCC, is a federal income tax credit for part of the mortgage interest you pay each year, for as long as you keep the loan and live in the home. In Texas, you get one through TSAHC or TDHCA, issued alongside your mortgage at closing, not from the IRS directly. TSAHC's MCC is a credit equal to 15% of your annual mortgage interest and is only available combined with its down payment assistance. TDHCA offers its Texas MCC either standalone or combined with its assistance, at a credit rate it publishes on its daily rate notice. Either way, you generally need to be a first-time buyer (or a qualified veteran, or buying in a targeted area), meet income and price limits, and owe federal income tax for the credit to help in a given year.

An MCC isn't down payment money. It doesn't show up as cash at closing. It's a line on your federal tax return every year after. Below I'll walk through how the credit works under federal law, what each Texas program offers, how it can help you qualify, the recapture tax people worry about, and the mistakes I see.

How the credit works under federal law

  • It's a credit, not a deduction. The credit equals the certificate credit rate times the interest you paid on the certified loan that year (26 U.S.C. 25(a)). A credit reduces your tax dollar for dollar. A deduction only reduces taxable income.
  • There's a cap at higher credit rates. If the certificate's credit rate is above 20%, the credit is capped at $2,000 a year (26 U.S.C. 25(a)(2)). At TSAHC's 15%, that cap doesn't apply.
  • Unused credit carries forward. If the credit is more than your tax liability, the extra carries over to the next three tax years, within limits (26 U.S.C. 25(e)(1)).
  • It's nonrefundable. If you owe no federal income tax, the credit doesn't create a refund. TDHCA's Lender Guide says the same thing in plain terms: you must have a tax liability to benefit in a given year.
  • Your interest deduction shrinks by the credit. If you itemize, the mortgage interest you deduct is reduced by the amount of the credit (26 U.S.C. 163(g)).
  • You claim it on IRS Form 8396. See IRS, About Form 8396.

I'm not a tax professional, and how much an MCC is worth depends on your whole tax picture. Talk with a tax preparer before you count on a number.

TSAHC's MCC

  • Credit equal to 15% of the mortgage interest you pay each year.
  • TSAHC's standalone MCC has been discontinued indefinitely. You can still get an MCC combined with TSAHC's down payment assistance, as funds are available (TSAHC MCC page).
  • For first-time buyers (no ownership interest in a principal residence in the last three years). That's waived for qualified veterans and homes in targeted areas.
  • Free for buyers who qualify for Homes for Texas Heroes.
  • TSAHC lists no minimum credit score or maximum DTI for the MCC itself, but because it's paired with TSAHC's assistance, that program's 620 (640 conventional) minimum applies (TSAHC homebuyer programs).
  • For Tarrant County, TSAHC's DPA plus MCC income limit is $110,300 for a household of 1 to 2 and $126,845 for 3 or more in non-targeted areas, with an MCC purchase price limit of $589,596, from TSAHC's limits file dated Oct 15, 2026 (TSAHC limits). Check the right column for your loan type and area.

More on the assistance side in how TSAHC's programs work.

TDHCA's Texas MCC

  • Available as a standalone MCC or as a combo with My First Texas Home assistance, subject to funding. The credit rate is set on TDHCA's daily rate notice, and your reservation confirmation shows the rate that applies to you (TDHCA Lender Guide, effective Aug 26, 2026).
  • A standalone MCC can't be combined with a first mortgage that uses outside down payment assistance or another subsidized loan or grant from a source other than TDHCA. Temporary buydowns aren't allowed.
  • First-time buyer rules match My First Texas Home: no owned and occupied primary residence in the last three years, waived for qualified veterans and targeted census tracts.
  • For the Fort Worth-Arlington area (Johnson, Parker and Tarrant counties), MCC income limits are $110,300 for 1 to 2 people and $126,845 for 3 or more in non-targeted areas, with a one-unit purchase price limit of $589,596, effective July 13, 2026 (TDHCA limits).
  • TDHCA charges an MCC issuance fee, which differs for the combo and standalone options and is listed in its Lender Guide. FHA 203(k) loans can't be used with any TDHCA program, including the MCC.
  • If you refinance later, TDHCA says it offers reissuance of MCCs after a refinance. It isn't automatic, so ask before you refinance.

See how TDHCA's programs work.

TSAHC and TDHCA MCCs are available through me where their current published guidelines allow them for your loan. Eligibility, funding and the program's rules still have to check out, and I'll confirm those before you count on it.

How an MCC can help you qualify

Because the credit puts money back in your pocket each year, some programs let it count in qualifying. For FHA, HUD lets the lender include MCC income as effective income, documented and calculated at the current subsidy rate (HUD 4000.1 II.A.4.c.xii(D)). That can help your debt-to-income ratio on a tight file. Other loan types have their own rules, so I'll tell you whether it's being counted on yours rather than assume.

The recapture tax, in plain English

This is the part that scares people, and it applies far less often than they think. Under federal law, you may owe a recapture tax only if all of these happen (26 U.S.C. 143(m)):

  • You sell or otherwise dispose of the home within nine years.
  • You sell at a gain.
  • Your household income has risen above the limits the formula sets for that year.

It doesn't apply to a disposition because of death, and it's capped at 50% of your gain. The amount is figured on IRS Form 8828 (IRS, About Form 8828). TDHCA's program matrix also notes that its programs may be subject to federal recapture. If you think you'll move within a few years, talk to a tax professional before you choose an MCC.

Fictional example

This example is made up to show how the pieces fit.

Jamal is a Fort Worth firefighter buying his first home with an FHA loan. He qualifies for TSAHC's Homes for Texas Heroes, so his MCC is free when he pairs it with TSAHC's assistance. Each spring, he and his tax preparer claim the credit on Form 8396 for 15% of the mortgage interest he paid. In the year he worked less overtime and owed less tax, the unused credit carried forward. Because the credit counts as income on his FHA file, his ratios had a little more room. Whether he qualifies still depends on TSAHC's income limits, funding and underwriting approval.

Common mistakes

  • "It'll cover my down payment." It won't. It's a tax credit you see when you file.
  • "My lender issues it." The housing agency issues it. I package the reservation and paperwork through the program.
  • "Refinancing keeps it." Not automatically. A refinance can end it unless the agency reissues it.
  • "I don't owe tax now, so it's worthless." Maybe this year. Unused credit carries forward three years, and your income may change.
  • "Recapture means I'll owe money if I sell." Only within nine years, at a gain, with income above the limits.
  • "Anyone can get one." First-time buyer rules, income limits and price limits apply. See who counts as a first-time buyer.

What to have ready

  • Your last three years of federal tax returns or IRS transcripts. Programs use them to confirm first-time buyer status, and TDHCA needs the prior year's return on MCC closings after Feb 15.
  • Household income for everyone who'll live in the home and sign the deed of trust.
  • A DD-214 if you're a veteran.
  • Your tax preparer's contact, so we can look at the value together.

Next step

Thinking about pairing an MCC with TSAHC or TDHCA help on a Fort Worth area purchase? I'll check eligibility and current availability, and walk you through how it'd fit your loan. Book a call, or when you're ready, start an application.

Related questions

Sources

Links checked Oct 21, 2026.

About the author: McKade Lively, NMLS 2704474, American Pacific Mortgage Corporation dba True North Home Loans, NMLS 1850.

Equal Housing Opportunity.

Last reviewed: Oct 2026

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