The Sycamore City Council created a mortgage credit certificate for first-time home buyers.

The Illinois Housing Development Authority sponsors an annual program that allows first-time home buyers to take 25 percent of the annual interest paid on their new mortgage as a credit against their federal income tax liability.

The upper income limit for a family of three or more is $73,600. For a household of one or two people, it is $64,000.

The upper limit on a new home is $203,050. The upper limit on an existing home is $199,230.

A family can save up to a couple thousand dollars a year, Sycamore City Manager Bill Nicklas said.

The program is set up so that if, for example, a buyer takes out a $92,000 conventional market-rate mortgage at 6.25 percent on a 30-year fixed rate loan in the first year, he or she would pay $5,719 in mortgage interest. With a mortgage credit certificate, the buyer can take 25 percent off his or her federal income tax obligation. Over the loan, a buyer can save $27,981.

To participate, homeowners have to talk to their lenders, Nicklas said.

The credit is good for the life of the loan, and there is no direct expense for taxpayers.

“It’s just a service we provide,” Nicklas said. “It’s not used as an economic tool.”

The lending bank works with the Illinois Housing Development Authority on the program.

A certificate to establish the credit is issued to a homeowner once the house is purchased.

All states have authority to allocate “private bond authority” with a ceiling tied to population. The use of a volume cap for industrial revenue bonds or mortgage revenue bonds is limited.

In Illinois, the three principal options for the municipal use of the bond authority are industrial revenue bonds, mortgage credit certificates and home equity loan programs. In December 1998, Sycamore gave most of its bond authority to Kishwaukee Community Hospital to help with its expansion.

That was when the mortgage credit certification option was put into place.

Last year, only one Sycamore family participated in the program.

Mayor John Swedberg said the reason was because mortgage rates are so low and, with adjustable rate options, people are able to pay their mortgages without needing help.

He said he wanted to see if there would be any more interest in it from Sycamore citizens.

This proposal has to pass through the city council before citizens of Sycamore can benefit from this, Swedberg said.