Letter of explanation (Part 2)

Someone else who is listed as a bank account holder on your bank statements: Yes, it seems to be none of our business. It’s a joint account right? What else do we want to know? It might seem like a joke that we even ask. But it is very important for some loan programs to clarify this information, especially for FHA financing. FHA programs require underwriters to include spouse debt to evaluate our borrower’s ability to repay if the property is located in community states. If, for example, our borrower listed him/herself as unmarried by mistake (and trust me that happens VERY often), yet someone else is showing up on his/her bank statements with the same last name, we might question that our borrower marital status is not correct. If the borrower can write us a letter explaining his/her relationship with the other accountholder (ex: daughter, son, parents), then we should be good to go.

Large deposits on bank statements: Shouldn’t the bank be happy that I have money? Why do you care if I deposit large amount of money into my bank account??? Yes, the more you have the better. However, we want to make sure this deposit is not a cash advance from your credit card, a loan from another bank, or you borrow it from someone that you need to repay back later. If it is, then we will need to take that monthly repayment into consideration because it is considered as debts.

I hope this article gives you some brief insights on why we need these items. I will write more about this topic in the near future.

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7 thoughts on “Letter of explanation (Part 2)

  1. Underwriter on

    Please defer your question to the Q&A page

  2. TNC on

    I have to write a LOE for derogatory credit for student loan late payments. I make enough money to pay the loans but just been flaky on repayment, although the last few months i have been consistent in repayment and will be going forward. Can you help?

    • Underwriter on

      Sorry, I do not help flaky borrowers. You are an adult now. Do the right thing and make payments on time. Until then, you shouldn’t even apply for a home loan.

  3. Sarah on

    I have been asked to write LOE. I only have food purchases on my bank statments, I am having a hard time creating this letter. Please help get started so that I can get approved.

    • Underwriter on

      Hi Sarah:

      What exactly are they asking? Are they asking you to explain a large purchase?

  4. Toccara Hiemstra on

    Thank you for a great post.

    • Underwriter on

      You are very welcome. I hope the info helps

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