New Debt before Qualifying

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    I began my NACA journey at the end of February 2022. I received all of my action items and have completed them. I was told that I needed to pay off my 2021 tax bill. My tax bill was pretty high and I took out a personal loan in March 2022 to cover the tax bill. I paid off the tax bill and applied the rest of the funds to the balance of the loan that I took out. I have the loan paid down to about half.

    I am concerned about what this will do to my qualification. My next meeting with my counselor is in August 2022. I am trying to understand what I can expect at this point. Is it feasible for me to believe that my counselor may have me wait another 6 months or 3 months?

    I am a little anxious and believe I may have shot myself in the foot, but there was no way I would have been able to pay off that entire tax bill, save my payment shock savings and the overall amount that I needed to have by our meeting in August.

    If anyone has taken out new debt before qualification and can give me some feedback or some insight that would be great.

    If there is a counselor who can tell me what I can expect that would be very helpful.


    Hello trulycarter,

    I’m afraid a delay is going to be inevitable in your case. Having acquired new debt, you are going to have to establish a payment history on the loan. Had you worked directly with the IRS on a payment plan, you would have still been unable to qualify until it was paid in full. So you were looking at a delay in qualifying regardless of which way you had handled it.

    The bottom line to this though is the fact that you were unable to pay your taxes. This indicates you are either self-employed or a 1099 independent contractor at a company. Were you a W-2 employee, those taxes would have been taken out automatically each pay period, and self-employed/1099 workers should set aside part of their income as they receive it to cover their taxes. The way things are being done now, it’s going to be viewed as not handling your money as well as you could (and should) be doing.

    Long story short, you’re going to need to tighten your belt a bit, get the new loan paid off or create a payment history, and also start tucking away money regularly to cover the tax bill you already know you will have next year.

    I’m sorry that this is going to hold you back, but the last thing anyone wants to see is for the IRS to swoop in and place a “super lien” on the home you just bought. So it’s far better to make the adjustments necessary to resolve this problem and make sure it never happens again.

    Tim Trumble
    Online Operations, NACA

    • This reply was modified 1 month, 4 weeks ago by TTrumble.
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