How to Write a Letter of Explanation

A Letter of Explanation (LOE) is your opportunity to provide context for anything unusual in your financial history. A well-written LOE can mean the difference between approval and denial.

Keep your LOE brief and factual. Underwriters don't want a lengthy narrative—they want clear, specific information that addresses their concern.

Always include dates, dollar amounts, and any supporting documentation. For example, if you're explaining a large deposit, state the exact date, amount, source, and attach proof like a gift letter or sale receipt.

Be honest. Underwriters are experienced at detecting inconsistencies, and getting caught in a misrepresentation will kill your application immediately.

Use a professional tone. This is a business document, not a personal letter. Stick to the facts and avoid emotional appeals or excuses.