How To Write To Write Letters Of Explanation To Mortgage Underwriters

0

How To Write Letters Of Explanation To Mortgage Underwriters

This BLOG On How To Write Letters Of Explanation To Mortgage Underwriters Was Written By Michael Gracz Of Gustan Cho Associates Mortgage Group

How To Write Letters Of Explanation To Mortgage Underwriters

For those who have gone through the mortgage application process, they have encountered where a mortgage underwriter requesting Letters Of Explanation to mortgage underwriters on certain issues such as a prior bankruptcy, a prior foreclosure, a prior deed in lieu of foreclosure, or prior short sale.

  • A mortgage underwriter may also ask a letter of explanation for the following reasons:
    • large or irregular deposit on a bank account
    • credit inquiries
    • late payments
    • overdrafts in bank accounts
    • charged off accounts
    • collection accounts
    • gaps in employment
    • other questionable items on your credit report or mortgage loan application

How To Write Letters Of Explanation To Mortgage Underwriters When Underwriter Requests It

How To Write Letters Of Explanation To Mortgage Underwriters When Underwriter Requests It

Many borrowers, especially first time home buyers, panic when asked for letters of explanation to mortgage underwriters. Reasons underwriters asks letters of explanation to mortgage underwriters is so the subject matter needs clarification.

  • For example, letters of explanation to mortgage underwriters may be requested if borrowers had a major reduction in income a certain year
  • It may be because reduction in income due to the following reasons:
    • maternity leave
    • injury
    • personal extended vacation
    • school
    • temporary lay off
    • or personal issues
  • There is no right or wrong answer
  • Underwriters just needs clarification on concerns in order to issue a mortgage approval

How To Write Letters Of Explanation To Mortgage Underwriters

How To Write Letters Of Explanation To Mortgage Underwriters

Letters of explanation to mortgage underwriters does not have to be long.

  • A one or two sentence or a paragraph explaining the issues is sufficient
  • Only answer the items that the mortgage underwriter asks
  • Do not go off on a tangent because do not want to open up a can of worms
  • For example, if the mortgage underwriter asks for the reason for filing bankruptcy tell them the reason why of filing bankruptcy
    • For example, if lost job and that was the reason filed bankruptcy
    • just state the loss of job and the reason that led to filing bankruptcy
  • Example will be :
    • I was laid off from my employer XYZ
    • Could not secure full time employment until 8 months later
    • Due to no household income, and creditors calling me, I had no other choice but to file bankruptcy and get a fresh start
  • Sign and date the letter of explanation
  • As for credit inquires, a one liner on each credit inquiry such as the following:
    • applying for mortgage
    • applying for better interest rate credit cards
    • shopping for a car loan, etc. will be sufficient

Letters Of Explanation For Large Or Irregular Deposit

what is this Letters Of Explanation For Large Or Irregular Deposit

Mortgage underwriters will question large or irregular deposits.

  • All large and irregular deposits needs to be sourced in order to use it for down payment and/or closing costs
  • An example of a letter of explanation for a large or irregular deposit can be a sale of a vehicle
  • In order for the mortgage loan applicant to be able to use the funds from the sale of the car for down payment or closing costs, a letter of explanation is required as well as supporting documents such as copy of check, deposit slip, and bill of sale
  • Any irregular deposit of $200 or more, a letter of explanation is required

Letters Of Explanation Should Be Short And To The Point

Why Letters Of Explanation Should Be Short And To The Point

Again, as mentioned earlier, a letter of explanation does not need to be lengthy and should not be a multi-page story.  A few sentences to no more than a paragraph and should just be focused on the matter at hand.  Sign and date it and submit it to mortgage loan originator to review before it gets submitted to underwriting.  Borrowers who need a pre-approval, click APPLY NOW and complete the 4 page 1003.  Mike Gracz of Gustan Cho Associates Mortgage Group and his Team is available 7 days a week, including holidays and weekends.  Mike can be reached at 630-659-7644 or can text Michael at this number for faster response. Or email us at gcho@loancabin.com.

Leave A Reply

Your email address will not be published.

CALL NOW