Tax credit can help put home ownership in reach

Mel Schuckenbrock always said that if he bought a house in Washington, it would have to have a view of Mount Rainier.

In 1987, after looking at more than a dozen homes that just weren't right, Schuckenbrock found the perfect three-bedroom rambler in Tacoma. From a window in the back, there was the Mountain.

At the time, Schuckenbrock was married with two small children. He had just started a professional job after leaving the military as an infantry officer.

With help from a veterans loan and the Mortgage Certificate Credit Program, Schuckenbrock was able to afford his dream home, which cost $63,500.

"Without the MCC program, I wouldn't have qualified for the payments," said Schuckenbrock, now a loan officer for Viking Bank in Tacoma.

The program allows qualifying first-time homeowners to claim a federal tax credit of up to 20 percent of their annual mortgage interest paid. It was run by the Washington State Housing Finance Commission through the 1980s.

However, scarce resources and economic conditions forced the commission to shift focus to programs for lower-income, first-time homebuyers in the 1990s, said Dee Taylor, director of its home ownership division.

For more information

To learn more about the Mortgage Credit Certificate Program, call the Washington State Housing Finance Commission at 800-767-4663; check its Web site at www.wshfc.org/buyers/MCCprogram.htm; or e-mail the commission at askusHO@wshfc.org.mortgage

But last month, the program was relaunched, allowing taxpayers in higher-income brackets a chance to own their first home by reducing their federal tax bill.

The commission partners with lenders who set underwriting rules and submit applications for approval. Homebuyers have to meet certain income and purchase-price requirements. There is a nonrefundable fee of $495.

If approved, the credit can be used for the life of the loan. Here's how it works:

Say you want to buy a home that costs $200,000 and you get a mortgage with a 6 percent interest rate. You pay about $12,000 in interest in the first year of the loan.

When tax times comes around, you get a credit of up to 20 percent of that interest, or about $2,400, which essentially can be credited as income-tax paid. The remaining mortgage interest, or 80 percent, continues to qualify as an itemized deduction.

How effective the program is depends on the extent that the homeowner's tax liability can be offset by the credit.

According to the commission, higher-income buyers with few deductions or credits typically get the most out of the program.

The credit is expected to be popular in King County, where the median sale price of a single-family home reached $419,500 in April, and the median price for condominiums was $247,900.

"In King County and Seattle, it's tough for a moderate-income person to buy a home," Taylor said. "With rising incomes and home values, especially in the Puget Sound area, people could use some of the benefits of a tax credit."

To qualify for the program in King and Snohomish counties, a one- or two-person household must make $70,000 to $90,000 a year and buy a home that costs $480,000 or less.

The commission's House Key program, which is for lower-income homebuyers, caps income at $75,000 a year for a one- or two-person household.

Schuckenbrock said he will tell potential lenders about the program and he'll do so with first-hand knowledge.

"It was a great program for me," he said. "My house payment is only $654 a month."

Nearly 20 years after buying his first home, he still benefits from the Mortgage Credit Certificate Program and enjoys that backyard view of Mount Rainier.