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Your answer will allow us to determine if you have enough deposit to apply for a loan. If you don’t know the exact price of your property then we can use an approximate value. Don’t blame anyone else or the creditor for your mistakes, as this can really reflect badly on your character. I have since moved to a major city, have stable employment and have paid my outstanding bills. In this case, an LOE should come from the person who owns the home or property where you are living.
This will also create some distance between the timing of your application and your previous credit problems. Remember, it’s in your best interest to come across as scrupulously honest and transparent. In some cases, it can even make the difference between your application being rejected or accepted. So it might help to include a letter whether or not you’re asked.
Explanation Letter Template
For some reason, the transfer was not completed, and they continued sending bills to my previous address. After some time of the account being unpaid, they lodged a default on my credit file without notifying me. I am currently pursuing this further with the Telecommunications Ombudsman. I am aware of the serious nature of a credit agreement and will ensure every effort is made to make payments on time for my home loan. Please do not hesitate to contact me on XXXX if you require further information. So, if you’ve changed jobs or otherwise have unexplained sources of income, the underwriter may wonder why.
Late payments reported to the credit bureaus will stay on your credit report for seven years. A letter of explanation can help clarify why you were late and the steps you’ve taken to prevent it from happening again. A letter of explanation is your chance to answer any questions a lender might have about your loan application. This can range from a gap in your employment, to a gift you received from your family, to a collection action in your credit report. It's designed to give the underwriters -- who are tasked with finalizing the loan - all the information they need while they analyze your application.
The final word on writing a letter of explanation
A letter of explanation can also help if your employment gap was an anomaly. For instance, many workers were laid off during the Covid pandemic but otherwise have an excellent track record of employment. Lenders can be more flexible when they have all the details about your scenario. If you’ve experienced a significant gap between jobs and subsequently failed to meet a financial obligation, you can explain the situation and why it won’t happen again. If so, look into SoFi’s fixed-rate mortgage loans with terms of 10, 15, 20, or 30 years. Understanding how a lender will see your mortgage application can give you confidence and may help you head off any potential problems.
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Mortgage Letter of Explanation (LOE) Sample
Johansson also recommended steering clear of emotional language. If a lender still isn't willing to give you a home loan after you resubmit your letter of explanation , you might want to consider applying with another lender. However, you will have to restart the loan process, and it's likely you will need to offer another letter of explanation. If you have unpaid collection accounts on your credit, you may question whether it's worthwhile to pay them off before applying for a home loan.
You must make the case that whatever caused your bankruptcy is in the past. If you went through a major medical event, you’ll need to state that you’ve returned to health. If it was due to a failed business, you’ll need to establish that you’ve developed a new, more stable income source. The worst explanation is that you got too deep in debt, couldn’t pay your bills, and resorted to bankruptcy to get yourself out of trouble.
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Don’t assume your lender won’t be able to give you a loan if they need one of these letters – the opposite is often true. They might simply need clarification or more information about your credit report or bank statement. Some explanations are always required — such as inquiry letter requests or address discrepancies. In other cases, the underwriter just needs additional assurance that you can afford the loan before they approve it. A cosigned student loan, car loan or mortgage will require an explanation and possibly proof that you don’t make the payments.
Your employer should use the same format detailed below if the lender requests an LOE directly from them. All assignments are delivered to you via your personal account here at our website. We also send your order via email, that way you can always be sure that you will receive it without any troubles. When my friend told me that he orders papers online, I thought that it was a really bad idea.
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Providing a summary letter, like one or two brief paragraphs, may not get the job done and may even invite requests for additional information. Please accept this letter as an explanation for my Chapter 7 bankruptcy filing in 2015. After being hospitalized for more than two weeks, she was confined to bed rest for several weeks more.
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