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Frequently Asked Questions

 

What is a Mortgage Credit Certificate?

Mortgage Credit Certificate allows the homebuyer to claim a tax credit for some portion of the mortgage interest paid per year (not to exceed $2,000). It is a dollar-for-dollar reduction against their federal tax liability. This credit reduces the federal income taxes of the buyer, resulting in an increase in the buyer’s net earnings. Increased buyer income results in increased buyer capacity to qualify for the mortgage loan. The MCC has the potential of saving the MCC holder thousands of dollars over the life of the loan.

 

How do you figure the tax credit the homebuyer can receive?

The mortgage credit can be calculated as follows: loan amount x loan interest rate x percent of credit allowed = amount of credit.

 

How does a homebuyer apply for an MCC?

The homebuyer may obtain an MCC through any of the approved Lenders. The homebuyer should apply for the MCC at the same time he or she makes a formal application for a mortgage loan. After an application is filed, the lender will arrange with Montana Housing to have the Mortgage Credit Certificate issued. There will be a nonrefundable fee to make application for an MCC.

 

How long does MCC last?

The MCC will remain in effect for the life of your mortgage loan, as long as the home remains your principal residence and you keep the same loan. The amount of your annual mortgage credit will be calculated on the basis of 20% of the total interest paid on your mortgage loan for that year. As the amount of interest you pay on your first mortgage declines so does the credit.

 

I was issued an MCC by Montana Housing; can I refinance my mortgage loan?

Yes, but to use the MCC certificate after refinancing, a borrower must apply for re-issuance of the MCC certificate.

 

What happens if a qualified Homebuyer cannot use the entire amount of the MCC credit for the year in which it applies?

If the amount of the MCC credit exceeds the MCC holder’s tax liability, reduced by any other personal credits for the tax year, the unused portion of the credit can be carried forward to the next three tax years or until used, whichever comes first. The homebuyer will have to keep track of the unused credit each year. The current year credit is applied first and then the oldest amount of unused credit applied next.

 

What loans types can be used with the MCC?

The program does not place restrictions on the mortgage financing with regard to type, term or rate. However, only first mortgages (as opposed to second mortgages) qualify. In addition, mortgages funded with a qualified mortgage bond are not eligible. This includes any bond loan funded by Montana Housing.

 

When do MCC documents needs to be signed?

MCC documents are signed before or at closing of the first mortgage purchase loan.

 

Who is eligible to receive an MCC?

The MCC Program is open to borrowers who:

  • meet income and home purchase requirements;
  • have not owned a home as primary residence in the past three (3) years;
  • meet the qualifying requirements of the mortgage loan;
  • will use the home as their principal/primary residence.

Are co-signers allowed in the Veterans Home Loan program?

No. Co-signers do not meet the definition of "eligible applicant" in the Veterans Home Loan program.

 

Are loans on manufactured homes allowed under the Veterans Home Loan program?

Yes. Loans on manufactured homes that meet the following criteria are eligible in the Veterans Home Loan program: doublewide or larger; 1976 or newer; are de-titled and are on a permanent foundation. The foundation must meet FHA standards, even if it is not an FHA loan, and be designed by a qualified architect or engineer for that specific home and site (not by a contractor). Beyond these requirements, Montana Housing follows the requirements of the provider of mortgage insurance or guarantee. 

 

Can the Veterans Home Loan program be used to finance Condos?

No. The Montana Veteran’s Program is designed to purchase single family residences that have full ownership of the land they sit on

 

Can the Veterans Home Loan program be used to refinance undeveloped land when the land is part of the take-out financing on construction of a new home?

Yes, the Veterans Home Loan program can be used to refinance undeveloped land. Refinancing of land as part of construction of a new home is permissible

 

Can a loan under the Veterans Home Loan program use a Mortgage Credit Certificate (MCC)?

Yes. The Veterans Home Loan program loans are funded with Coal Tax dollars, not bond funds.Only loans purchased with tax-exempt bond funds are restricted from having MCCs.

 

Can the borrower utilize gift funds for their $2,500 required investment in the property in the Veterans Home Loan program?

Gift funds for down payment and/or closing cost assistance are allowed; however, no portion of gift funds count towards the borrower’s $2,500 required investment.

 

Do grant funds or Down Payment Assistance funds count towards the borrower's $2,500 required investment in the Veterans Home Loan program?

Grant or Down Payment Assistance funds can be used with the the Veterans Home Loan program; however, no portion of the grant or down payment assistance funds count towards the borrower's $2,500 required investment.

 

Do borrowers have to use a VA loan guarantee for the Veterans Home Loan program?

National Guardsmen and Reservists may not qualify for a VA loan guarantee. Any borrower in the Veterans Home Loan program may use the FHA, VA, or HUD 184 programs for the mortgage insurance on a loan. There is no requirement that the borrower use a guarantee from the Veteran’s Administration.

 

Do you have to be a resident of Montana to use the Veterans Home Loan program?

Yes. Documentation of the Montana residency is required in order to use the Veterans Home Loan program.  Residency for initial qualification for the Program requires a copy of a filed Montana tax return showing full year of residence in Montana. If the borrower doesn’t have a Montana tax return showing a full year of residence in Montana, additional documentation of residency will be required, such as a copy of a current Montana driver’s license and a copy of a current motor vehicle registration.

 

Does a home inspection count as part of the minimum $2,500 the borrower must invest into the transaction on a Veterans Home Loan program?

Yes. Any fees associated with the purchase transaction that are paid for by the borrower, from their own funds, counts as part of the minimum $2,500 borrower investment.

 

Our lending institution participates in MERS. Is that allowable in the Veterans Home Loan program?

No. The Veterans Home Loan Program loans are sold to the Montana Board of Investments, which does not participate in MERS. All loans must be assigned to the Montana Board of Investments via recorded assignments with the County Clerk and Recorder.

Are non-occupant co-borrowers allowed in Montana Housing programs?

No. All parties who appear on title to the property must meet all qualifying criteria of the Montana Hosing Loan Programs, which includes occupancy, prior ownership limitations and income limits.  

 

Will Montana Housing accept loans with "co-signers"?

For Montana Housing programs, a co-signer must be a non-occupant co-signor and will not be on title to the residence. The co-signor will be allowed for credit purposes only, meaning the occupying borrower has the income to qualify per the insurer’s DTI requirements, but does not have adequate credit to qualify. Non-occupying co-borrower not permitted. Co-signers are not allowed in the VHLP Program.

 

Can a borrower utilize multiple down-payment programs to purchase a home?

Yes, provided they meet criteria established by each program and they contribute the minimum amount of funds required to the transaction. A Bond Advantage DPA loan and a MBOH Plus 0% Deferred DPA loan must be a second-position lien on the property. Additional requirements will apply if other DPA programs include amortizing loans. For instance, payments for all amortizing loans must be included in calculations while underwriting the first mortgage, to prevent a homeowner from being placed in an unsustainable mortgage.

 

Why can Montana Housing provide the 3.5% down payment on an FHA loan, when other organizations can’t?

Montana Housing is a designated "Instrumentality of Government," and as such, is authorized to provide this assistance statewide.Some other organizations also have this same designation, but only within their governmental jurisdiction. Loan originators work closely with local organizations to provide prospective home buyers with all available financing options.

 

Will lenders interim-service Montana Housing loans they have originated, pending purchase of the loan by Montana Housing?

No. If Montana Housing is selected by the lender to be the servicer of any program loans they have originated the loans, the servicing will transfer to Montana Housing at closing and the first payment and all subsequent payments will be posted by Montana Housing servicing department, regardless of when the loan is actually purchased. The loan will then be purchased at the original loan amount.


Are there limits to the amount of land that can be purchased with Montana Housing funds?

The Montana Small Tract Financing Act is followed and limits land purchases to 40 acres. Montana Housing also has limits. If the loan is for new construction and on private sewer and septic systems, the value of the land cannot be more than 35% of the total appraised value. Also, if the land purchased can be subdivided or has an extra lot not encumbered by the house or garage being purchased, these programs cannot be used. These situations can be reviewed on a case-by-case basis

 

Can Montana Housing loans be assumed?

Yes. The new buyer must meet the same Montana Housing requirements that the current owner did (i.e. income, first time homebuyer, etc.), as well as the requirements of the mortgage insurer or guaranture (FHA,VA, RD, HUD 184).

 

How do borrowers apply for Montana Housing funding?

Borrowers must work with with a approved Montana Housing participating lender to apply for a Montana Housing loan. Lenders conduct the credit analysis and qualify the borrower and property for Montana Housing programs. The lender closes the loan and Montana Housing purchases the loan from the lender once all required documents are received. Montana Housing or a local lender services the loan.

 

If the borrower has to move due to hardship (i.e. employment transfer), are there any options available regarding their Montana Housing funded home?

Yes, the borrower can apply for an “Occupancy Waiver.” This allows the borrower to have the home vacant while trying to sell or rent it for a six month period. At the end of six months, a new waiver must be requested. If the home has been rented for over 12 months, there can be tax consequences. Military occupancy waivers are given for 12 month periods at a time.

 

What are Montana Housing rates and will they change?

Rates follow the market and depend on the rates at which we can sell our tax exempt bonds. Current rates can be found here. Rates are set on a fixed, 30 year term and will not change during the life of your loan. No penalty for pre-payment exists. 

 

Who's income gets counted toward the established income limits?

Typically, anyone 18 years and older living in the household will have his/her income counted. This includes wages, over time, bonuses, commissions and raises. Also included in the income calculations will be any social security income, pension income, VA benefits, or child support income received. Contact a staff member upfront with any specific concerns or questions regarding income calculations.

 

Are condos eligible in Montana Housing programs?

Yes. Condominiums are eligible Montana Housing programs, but not in the VHLP program. The condo project must be an FHA-approved project and no more than 25% of the condos in a project can be currently financed by Montana Housing. Additional insurance requirements may apply.

 

Will Montana Housing purchase loans for manufactured home loans (including single-wides)?

Yes, manufactured homes are eligible in Montana Housing programs; however, only homes that are 1976 or newer, are de-titled and are on a permanent foundation. The foundation must meet FHA standards and be designed by a qualified architect or engineer for that specific home and site (not by a contractor). Beyond these requirements, Montana Housing follows the requirements of the provider of mortgage insurance or guarantee. Single-wide trailers are not allowed in the VHLP program.

 

Can lenders use Montana Housing Down Payment Assistance loans with a purchase-money mortgage being sold into other markets?

No. Montana Housing Down Payment Assistance loans can only be used in connection with a purchase-money mortgages sold to Montana Housing under the Regular Bond Program.

 

Can I use a Mortgage Credit Certificate (MCC) along with a loan funded by Montana Housing?

No, an MCC can be attached to any loan statewide except for a loan financed through a Montana Housing program - otherwise the IRS sees this as "double dipping" into tax exempt sponsored program funding. An MCC can be issued with a VHLP loan.

 

Are all borrowers required to take homebuyer education?

Yes. Each borrower in the Montana Housing programs who do not qualify for an exception are required to take an approved home buyer education class. Approved classes can be located at the Neighborworks Montana website.


MONTANA HOUSING | MONTANA DEPARTMENT OF COMMERCE
301 S. PARK AVE, STE 240 | PO BOX 200528 | HELENA, MT 59620-0528 | P: 406.841.2840 | F: 406.841.2841 | TDD: 406.841.2702 | TOLL FREE: 800.761.6264 

 

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