Letter of explanation for a mortgage template
A letter of explanation for an underwriter about a late payment, a large deposit, an employment gap or a credit inquiry, in the short factual form lenders expect.
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A general template, not legal advice
This is a general template, not legal advice. Rules differ by state, so check anything with legal consequences with a professional before you rely on it.
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Letter of Explanation
Jordan Lee
123 Main St, Apt 4
Austin, TX 78701
(555) 010-0000, jordan.lee@example.com
October 5, 2026
Taylor Kim
Underwriter, Northwind Home Loans
500 Congress Ave, Suite 1200
Austin, TX 78701
RE: Letter of explanation, loan number 2026-10-00417: late payment
Dear Taylor Kim:
I am writing to explain the late payment from February 2026 in the amount of $412.50 that appears in my loan file.
The February 2026 payment on my Contoso Auto loan was reported 30 days late. The payment was due on February 10. I had set up a new bank account in January and the automatic payment was still pointed at the closed account, so the February debit was returned.
I noticed the missed payment on March 4 when I received the notice, paid the full amount plus the late fee the same day, and updated the automatic payment to the new account. Every payment before and since has been made on time.
The matter has been resolved and I do not expect it to happen again. Please let me know if you need any further documentation.
Sincerely,
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Jordan Lee
Borrower
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Sam Lee
Co-borrower
How to use it
Type your name exactly as it appears on the loan application, the lender or underwriter you are writing to, and the loan or file number. Pick the item the underwriter asked about, add the date and the dollar amount if there is one, and write what happened in two to four sentences: what the item is, why it happened, what you did about it. Pick a closing statement and add the co-borrower's name if there is one, so both of you can sign.
The letter prints on one page with an RE line that names the loan and the topic, so the processor can file it without reading it first. Sign it, scan it and upload it with the documents that back it up: the bank statement, the pay stub, the paid-in-full notice.
Things to watch
Answer only what was asked. Extra detail invites extra questions. State facts, not feelings: "the automatic payment was pointed at a closed account" works, "it was a very stressful month" does not. If the item is a large deposit, name the source and attach proof of it, because an unexplained deposit is the item underwriters most often return.
Calculators that go with this
Frequently asked questions
How long should a letter of explanation be?
A few sentences to half a page. The underwriter needs a clear, dated explanation and a document that supports it. The template warns you above 250 words.
Do I need a separate letter for each item?
Yes, one letter per item the underwriter asked about. It keeps each explanation short and lets the processor file them against the right condition. Change the topic and the dates and print again.
What if the late payment was my fault?
Say so in plain words, say what you changed so it does not recur, and move on. Underwriters read hundreds of these; an honest one-time slip explained in two sentences is not what stops a loan.
Is what I type saved anywhere?
No. Everything stays in your browser and nothing is sent to our server. If you refresh the page it is gone, so print, save a PDF or download the DOCX when you are done.