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Writing a Letter of Explanation

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typewriterThere are several reasons to write a letter of explanation. When it comes to seeking approval for a mortgage loan, most who find themselves needing to write such a letter are doing it because of some blemish on their credit history. You may even have to write a letter for a simple explanation on why you got your credit pulled.

Credit isn’t perfect? All hope may not be lost! A letter of explanation is your opportunity to tell your side of things. It may make the difference between becoming a homeowner and staying a renter. A letter of explanation is your chance to tell the underwriter why your loan should be approved despite your less than perfect history.

You missed some work due to an injury. Your earnings were less than expected last year and your underwriter doesn’t know why. It makes him shy to approve a loan because as far as he can tell, there was no reason you made less money. Your letter of explanation is your shot to tell him about your injury, provide dates of work missed, even attach a note from your employer or physician to strengthen your case. Relevant details in chronological order will go a long way to having him seeing your side of things and approving your submission.

Ask your us for a copy of your credit report and begin to address each derogatory item. If you have recently had your credit run for any reason, describe why. Include dates, amounts of money involved, and the name of the creditor. Don’t be afraid of sharing details of personal challenges. Be honest and include how you plan on improving or how you have already overcome your financial problems. Personal life events and their accompanying emotions are factors an underwriter takes into consideration. After all, you’re writing to a thinking, feeling human. Not a computer.

If you get stuck or discouraged while writing your letter of explanation, speak with one of our friendly loan officers. We’ve got the tips and tricks you can use to make your home-ownership dreams come true.

Denial of your loan may result if your letter is insufficient. If your appraisal is incorrect and showing items that have already been dealt with or if you missed a car payment during your stay in the hospital, a thorough explanation could clear up any concern the underwriter might have.

All of this is just to explain away sketchy spots on your financial history that your underwriter might see as a risk in lending to you. Your loan officer will be able to tell you whether your letter of explanation is sufficient.

AUTHOR

Matt Demorest, President

Matt is the President and Founder of HomeSure Lending. He has extensive experience working in mortgage, finance, business development, business operations and non-profits. Matt holds a Masters Degree in Youth Ministry Leadership. NMLS #1011726

All stories by: Matt Demorest, President

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