These problems include:Įxcessive credit inquiries can also be a red flag if they lead the lender to suspect you’ve been shopping for credit because you’ve had trouble getting approved.įind Out: Can You Buy a House with Bad Credit? Unusual or inconsistent work history Past credit problems might prompt a request for a letter of explanation because they suggest you’ve had trouble managing your debt. Here are some items that might prompt your lender to request a letter of explanation: Derogatory items on your credit report Just about any aspect of your loan application can require a letter of explanation, but most requests have to do with credit, employment, cash reserves, or fraud protection. Why you might need a letter of explanation If something turns up that could disqualify your application, the underwriter might ask for a letter of explanation to help better understand the specific details of the issue. The underwriter takes a detailed look at your credit history, employment, tax returns, assets, and debts to make sure the information is complete and accurate and shows you to be at low risk of defaulting on the loan. What is a letter of explanation for a mortgage?Ī letter of explanation is your opportunity to explain inconsistencies in your mortgage application and any aspects of your financial history that your lender needs to understand better before it can approve you for a loan.Īfter you apply for a home loan, your application goes through the underwriting process. What to do if your letter of explanation is rejected.Why you might need a letter of explanation.

What is a letter of explanation for a mortgage?.

Here’s what you need to know about letters of explanation, including how to write one:

If the lender finds information that raises red flags, it might ask you for a letter of explanation to shed light on the issue - whether it be a gap in employment, a derogatory mark on your credit, or an unusually large deposit in your bank account. NMLS # 1681276, is referred to here as 'Credible.'Īfter you apply for a mortgage, the lender will evaluate your application and financial documentation to verify that you meet its requirements for loan approval. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Our goal is to give you the tools and confidence you need to improve your finances.

Default notice letter template nirtgage