What went wrong
Letters of Explanation
A letter of explanation is not a formality. It is the underwriter asking you to close a gap in the story, and a bad one can stall a file for a week.
An underwriter reads a file as a story. When something in it does not follow from the rest, they ask you to explain it. That is all a letter of explanation is.
The mistake borrowers make is treating it as paperwork. It is evidence.
The four that come up most
Credit inquiries. Every pull in the last 90 to 120 days gets questioned, because an inquiry may mean debt that has not appeared on the report yet.
What works: name the inquiry, say whether credit was extended, and if it was not, say so plainly. "Applied for a card at Target on 3 March, was not opened."
Large deposits. Anything materially outside your pattern. An underwriter has to rule out borrowed funds.
What works: state the source and attach the proof. A bill of sale, a gift letter, a tax refund notice. The letter alone is not enough.
Employment gaps. Any gap over a month.
What works: dates, reason, and what you were doing. "Left on 12 January, began at current employer 4 March. Took the time to relocate." Attach the offer letter.
Late payments and derogatories. Anything on the report.
What works: what happened, when it was resolved, and what has changed since. Do not argue with the report. If it is wrong, dispute it separately.
The structure that clears
Four sentences:
- What happened
- When it happened
- Why it will not recur
- What document proves it
Then attach the document. That is the whole thing.
What sinks a file
Vagueness. "Personal reasons" invites a follow-up, and every follow-up costs days.
Volunteering more than was asked. A letter about a credit inquiry that wanders into a business dispute has just opened a new question.
Emotion. Underwriters are reconciling a file, not judging you. Facts clear conditions; frustration does not.
Contradicting your own documents. Underwriters read everything. If the letter says one thing and a bank statement says another, the file stops.
Why this is worth getting right
Conditions are the most common cause of a delayed closing. Most of them are cleared by one well-written paragraph and one attachment.
Send me the condition list before you start writing. I have read enough of these from the other side of the desk to know what the underwriter is really asking.
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Questions people ask
What is a letter of explanation on a mortgage?
A short written statement addressing something in your file an underwriter cannot resolve from documents alone: a credit inquiry, a large deposit, a gap in employment, or a late payment.
How long should a letter of explanation be?
Short. Three or four sentences that state what happened, when, why it will not recur, and what document backs it up. Long letters raise more questions than they answer.
Does a letter of explanation hurt my chances?
No. Being asked for one means the underwriter is working the file rather than declining it. A vague letter hurts; a specific one closes the issue.
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