Letter of Explanation Generator
Your underwriter asked for a letter of explanation? Pick what it's about, fill in the details, and get a short, ready-to-sign letter. Templates for large deposits, employment gaps, credit inquiries, and late payments.
Explains where a large or unusual deposit in your bank account came from.
[Borrower name(s)]
September 29, 2026
Re: Letter of Explanation: Large Deposit
To Whom It May Concern,
I am writing to explain the deposit of [$ amount] on [Date] into my [Bank name] account ending in [####].
This deposit came from a transfer from my own account. [Add details, e.g. who sent it, what was sold and to whom, or which account it moved from.]
The funds are not a loan and do not need to be repaid. I can provide supporting documents, such as a receipt, statement, or bill of sale, on request.
I certify that the information in this letter is true and accurate to the best of my knowledge.
Sincerely,
[Borrower name(s)]
Nothing you type leaves your browser. Keep it short and factual, and attach any documents that back it up.
Underwriters reading your bank statements?
A bank-connected report shows your deposit history and recurring income clearly, so the one-off deposits are easy to spot and explain.
Get a bank-based income reportWhy underwriters ask for a letter of explanation
Underwriters verify everything in a loan file against your documents. When something doesn't fit the pattern, such as a deposit that isn't payroll or a few months without income, they need your explanation in writing before they can sign off. A request for one is normal and doesn't mean the loan is in trouble.
The most common requests
- Large deposits: any non-payroll deposit the lender can't source from your statements. If it's gift money, you usually need a gift letter instead.
- Employment gaps: time out of work in the last two years, plus proof you're working now, often confirmed with a verification of employment.
- Credit inquiries: recent credit checks, and whether they led to new debt the lender needs to count in your debt-to-income ratio.
- Late payments: what happened and why it won't happen again.
How to write one
- Answer only what the underwriter asked, in a few sentences.
- Include specifics: dates, amounts, creditor names, and account last four digits.
- Attach proof, such as a receipt, bill of sale, transfer confirmation, or offer letter.
- Sign and date it, with every borrower on the loan signing if it concerns them.
Frequently asked questions
What is a letter of explanation for a mortgage?
A short letter the borrower writes when the underwriter sees something in the file that needs context, like a large deposit, a gap in employment, a recent credit inquiry, or a late payment. It explains what happened in plain terms so the loan can move forward.
What makes a good letter of explanation?
Keep it short, factual, and specific: dates, amounts, account numbers (last four digits), and what happened. Answer only the question the underwriter asked, don’t add unrelated information, and attach documents that support it.
What counts as a large deposit for a mortgage?
Lenders commonly ask about any deposit that isn’t regular payroll and is more than about half of your gross monthly income, though thresholds vary by lender and loan program. They want to confirm the money isn’t an undisclosed loan.
Do I need a gift letter or a letter of explanation for gift money?
Usually a gift letter. It’s a specific document signed by the donor saying the money doesn’t need to be repaid. Use a letter of explanation for other deposits, like a transfer between your own accounts or the sale of personal property.
Is this letter of explanation template free?
Yes. There is no account or sign-up, and everything runs in your browser. Print the letter or save it as a PDF from the print dialog.
General information, not legal or lending advice. Follow your lender's instructions for what the letter needs to cover.