Why Do Buyers Get Asked To Write So Many Letters Of Explanation To Underwriters?

Happy Friday!

You may have noticed that clients get asked to write Letters Of Explanations for underwriting for all kinds of things. Many of them seem silly, like explaining why you are moving or why a property you sold 15 years ago is showing up on your credit report. Why is that?

Part of an underwriter’s job is to look at your file and ask themselves if things make sense. If that house you sold still doesn’t have an exit date on your credit report, the underwriter needs an explanation on that and it needs to be in the file in case of an audit years later.

If you are buying another owner-occupied property but keeping your current one, an underwriter might need to understand what your intent is and again that explanation needs to be in the file in case of an audit.

There are as many reasons for Letters Of Explanation as there are scenarios. They are simply used to document logical questions that underwriters or auditors do or would have on a file.

I’ll be available all weekend if you have a client who needs to be prequalified before Monday!

Have a great weekend!