A Mortgage Credit Certificate (MCC) is a tax credit that reduces your federal income tax liability, if you have one. Your tax liability is the amount the IRS taxes you for your earnings, not the amount that you pay or are refunded. Each year, the tax credit equals 40% of your annual mortgage interest paid. You continue to receive a tax credit for as long as you have a mortgage on your home, even if you refinance. Your lender may be able to use the amount you will receive from the tax credit as part of your income, for loan qualification purposes.
*Just recently, Family Housing Resources raised this in Arizona from 20% to 40%.*