An MCC is not a loan, but a dollar-for-dollar tax credit issued by a state or local housing finance agency (HFA). It allows eligible homeowners to claim a percentage of their annual mortgage interest as a nonrefundable tax credit.
📊 Example
If you pay $10,000 in mortgage interest and your MCC rate is 20%, you could receive a $2,000 tax credit. The remaining $8,000 may still be deductible if you itemize.