Process · 4 min read
What is a letter of explanation, and when do I need one?
August 11, 2026 · Written by Bill Egan, NMLS 7342
Short answer
A letter of explanation is a short signed note in your own words that fills a gap the papers do not. Late payments, a job gap, a large deposit, or extra credit inquiries are the usual reasons. It is not a waiver and it does not erase history. Egan Financial Group LLC uses it so the underwriter — the person who has to say yes — can see what happened.
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Why this comes up
The processor asked for a letter of explanation and it sounded like you were in trouble. You are not. Something on the credit report or the bank statements does not explain itself, and a person still has to say yes to the loan. You reached out because you do not know what to write.
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Where this goes wrong
The letter arrives late, or it is one vague sentence that does not match the dates on the credit report. The underwriter asks again. Days pass. Your rate hold is running. Or you copy a template from the internet and now the file has two stories. The loan sits in suspense — waiting, not denied — while the closing date gets closer and the seller starts asking questions.
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What we do about it
We tell you exactly which item needs a letter and which dates to cover. Plain sentences, your name, the date. We read it before it goes to underwriting so we are not bouncing it. Egan Financial Group LLC funds the loan here, so that note is not lost in a stack at another company.
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How to get ready
Write what happened, when it happened, and that it is resolved if it is. Use real dates. Do not guess. If it was a hospital bill or a stretch without work, say that in a normal paragraph. Sign it and keep it to about a page. We will tell you if a letter is even required before you write a novel.