Are there tax credits for first-time homebuyers?

Yes, thanks to the many city and county governments that offer Mortgage Credit Certificate (MCC) programs, which allow first-time homebuyers to take advantage of a special federal income tax write-off. The credit reduces the amount of federal taxes paid by the buyer each year, if he keeps the same loan and lives in the same house.

An MCC also makes it easier for eligible buyers to qualify for a mortgage loan. The lender can reduce the housing expense ratio - the percentage of gross monthly income applied toward housing expenses - by the amount of the tax savings. Normally, lenders reject loans if the housing expense ratio is too high.

Program requirements for MCCs vary, although most adhere to the following guidelines:

The buyer must live in the home being purchased with an MCC-assisted mortgage.

Total household income cannot exceed certain limits.

The buyer cannot have owned a principal residence within the past three years. This restriction may be waived if a property is purchased within a certain targeted area.

The purchase price must fall within an established limit.

More information is available by calling your local housing or redevelopment agency, or contacting your real estate agent.