The purpose of this letter is to explain why I have been sending my mortgage payment check late every month. On July 15,I was in an unfortunate road accident in which I temporarily lost use of both my legs.
There are times when a mortgage underwriter needs a letter of explanation for one or more items in your loan package. Letters are often needed to explain a credit problem such as the circumstances behind a bankruptcy or where you got the down payment. These are important components to your loan portfolio and can make the difference in the approval or denial of the loan.
Don't panic just because a lender asks for a LOE; it is common and good that they don't want to make decisions without all the facts.
Specific Issues Discussed During the underwriting process, the loan officer and underwriter go through every detail of bank statements, funding sources, credit items and other assets and debts.
Unusual deposits into your account are flags that require an explanation. Circumstances behind a bankruptcy or foreclosure also require an LOE.
If your down payment is a gift, this needs to be explained by you in a LOE and in a gift letter by the person giving you the funds, explaining it is not a loan. You may also be asked to provide a letter for multiple credit inquiries, explaining that you were shopping loan prices.
Just a few lines are sufficient to explain most items. You want to include the date, loan number and your personal information on the header and salutation. Define the subject with whatever the lender is asking for information on. For example, if the lender wants to know about a bankruptcy, place "RE: Bankruptcy Explanation" in the subject.
For a bankruptcy, the lender only needs to understand the circumstances behind it in an overview. Stating something as simple as, "I went through a medical illness and was out of work for one year.
I have since recovered my health and my job has been restored. Keep it short and to the point. There is no expectation of repayment. One Letter for All Vs. One for Each If your lender gives you a list of items to explain, ask him if he wants one letter or a letter for each.
Often lenders ask for a letter pertaining to each item so it can be filed in specific order in the loan portfolio. While it may be cumbersome to write a letter for several items in the file, take the time to create a template that includes your name, address, date and loan reference number.
Then customize the letter for each inquiry, sign it and send it to the lender. Remember that any LOE may then prompt an underwriter to ask for proof—proof of where the account gift funds came from, proof of a bankruptcy discharge date, or proof of child support payments.
The underwriter is asking for this to complete the file for you to have the best chance of approval.Use this sample letter to explain late payments when applying for credit. The basic premise of this explanation letter is to address: The situation you were in which caused you to pay late was beyond your control.
You have vowed to never let it happen again. When writing your letter of explanation, the magic formula is to just write a simple explanation, Halladay adds.
For instance, tell the underwriter that a snow plow hit your mailbox, and you didn’t get the bill that showed up delinquent on your credit report. Jul 18, · A Letter of Explanation is a simple few lines giving an underwriter insight into something flagged in the file such as odd deposits or credit issues.
New Answer If you are referring to writing a letter say to a mortgage company to explain past derogatories on your credit report, just be honest.
Of course, the sympathy factor does come into play. Use this sample letter explaining late payments as a template for your formal letter of explanation.
One of the most important aspects of a person's financial status is his credit report.
The credit score is especially vital if a large purchase, such as a home or vehicle, is upcoming. Jan 20, · SAMPLE LETTER OF EXPLANATION FOR CREDIT CHALLENGED BUYERS.
Re: Mortgage (FHA and/or VA Loan Application) Late payments dated 12/07 and 01/08 in regards to current ACME Credit Union (Auto loan) – I've been referring clients to this thread as an excellent example on how to write a letter of explanation, it is many years old but the.