Letter Of Explanation To Mortgage Underwriters Requests

By Gustan Cho

mortgage-underwriterWhen you apply for a mortgage loan and you have prior questionable items on your credit report such as prior derogatory credit, bankruptcy, foreclosure, judgment, disputes, and other items that an underwriter may need clarification, letter of explanation to mortgage underwriters will need to be provided.  Letter of explanation to mortgage underwriters should be brief, concise, and to the point.  Letter of explanation to mortgage underwriters should not cover off topics and should be focused on the item requested.  If you mention other questionable topics on your letter of explanation, it can open up another can of worms and once a mortgage loan underwriter sees other information that you have volunteered and it is questionable, then the mortgage underwriter cannot just ignore it.  The mortgage underwriter may and often times will then ask you for another letter of explanation on the subject matter that you mentioned.

What Types Of letter Of Explanation To Mortgage Underwriters Are Often Requested?

In the event if the mortgage loan applicant’s application file needs clarification, the mortgage loan underwriter will request a letter of explanation.  For example, if a mortgage loan applicant has had a history of good credit then all of sudden a period of late payments on all of his or her payments, the mortgage loan underwriter will require a letter of explanation.  If a mortgage loan applicant filed bankruptcy, a letter of explanation will be required.  The mortgage applicant does not have to write a disertation but simply a few paragraghs detailing why he or she had to file bankruptcy.  Some of the common acceptable letter of explanation can be that the reason for filing bankruptcy was due to the loss of a job or loss of their business.  Other situations where letter of explanation to mortgage underwriters may be required if the mortgage loan applicant had a prior foreclosure, deed in lieu of foreclosure, or short sale.  The letter of explanation can simply state that the reason for the foreclosure, deed in lieu of foreclosure, or short sale was due to the fact that they had an adjustable rate mortgage or balloon mortgage and when the adjustment period came up, the new payments were substantially higher than what they could afford.  Reasons like this was very common prior to the 2008 real estate meltdown where sub prime mortgage lenders gave home buyers teaser introductory mortgage rates for a certain period of time and when the teaser rate period was over, the new adjusted mortgage payments were double, sometimes triple.  Never write a letter of explanation to mortgage underwriters that due to the fact that your house had mortgage underwriter you decided to just turn your keys in and wait out the waiting period after a foreclosure and purchase a new home.  This letter of explanation to mortgage underwriters will definitely earn you a loan denial.  Your mortgage loan originator will review and coach you on what to write on your letter of explanation and review it prior to submitting it to the mortgage loan underwriter.

Letter Of Explanation To Mortgage Underwriters With Documentations Attached Shows Strength

If you had a period of bad credit and a letter of explanation is requested, providing documentation with your letter of explanation to mortgage underwriters shows strength and your mortgage loan underwriter will rule this in your favor.  For example, if the reason of having derogatory credit for six months was due because you got into an automobile or motorcycle accident, provide proof of your hospital bill, accident report, or letter from the hospital where you were treated and provide this with your letter of explanation to mortgage underwriters.  This will prove that the period of your derogatory credit was due to an extenuating circumstance and will add strength to your mortgage file and the mortgage loan underwriter will feel much more confident in your favor in getting you a mortgage loan approval.


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