ApprovalPrep

Letters of explanation

How to Write a Letter of Explanation

Six sentences, each doing one job. This page takes a letter of explanation apart sentence by sentence, says what each one is for, shows the version people write instead, and rewrites one weak letter line by line into one that works.

See the Letter of Explanation Kit

The method

Writing a letter of explanation is a two-stage job: first establish the four facts a reviewer needs — what happened, when, why, and where it stands now — and only then write the sentences that carry them. Reversing that order is what produces a long letter that answers nothing.

The reason is that a reviewer is not an audience. They have an open item, a checklist, and a queue. Prose written to persuade forces them to extract the facts themselves, and a letter that has to be mined is a letter that gets set down.

Key facts

Know the boundary before drafting.

  • Write the facts before the prose. Four bare lines — what, when, why, now — take about two minutes and decide whether the letter works.
  • Every sentence should fail the stranger test: if a sentence would still be true sent by someone else about a different situation, it is doing no work and should come out.
  • Adjectives are the tell. "A difficult period", "an unexpected expense", "a generous gift" all describe rather than state, and every one of them can be replaced with a date and an amount.
  • The reason goes in one sentence, not a paragraph. A reviewer needs a cause they can categorise; they do not need to understand it the way you do.
  • Stop when the condition is answered. Everything after that point is where the new questions come from.

Fields to collect

Build the factual record.

  • What happened, in one sentence with no adjectives
  • The date it started and the date it ended
  • The plain cause, stated only as far as you can support it
  • The position today, with the date it resolved
  • The exact figures, unrounded, as they appear on your documents
  • The name and relationship of any other party involved
  • The documents that support each of the four facts
  • The condition wording, copied from what you were sent

Exact sequence

Prepare it step by step.

  1. 1. Copy the request into a blank document and leave it at the top. You will quote it in the first line, and having it visible stops you drifting off the question.
  2. 2. Write four bare lines under it: What, When, Why, Now. No sentences, no context, no explanation of the explanation.
  3. 3. Next to each line, name the document that proves it. Any line without one either comes out or gets a note saying no document exists for it.
  4. 4. Now write the letter, one sentence per line, in that order, adding only the reference line, the attachment list, and the signature.
  5. 5. Delete every adjective and replace it with a date, an amount, or nothing.
  6. 6. Run the stranger test over each sentence, then read for anything that raises a subject nobody asked about, and delete that too.

Decision table

The six sentences, and what people write instead

Each row is one sentence of the letter. The middle column is what that sentence is for; the right column is the version that shows up in letters that come back.

SentenceWhat it is forWhat people write insteadThe fix
1. Reference lineLetting a processor match the letter to the open item without reading it"Dear Sir or Madam, I hope this finds you well"Quote the condition verbatim, with its identifier and your file number
2. What happenedGiving the reviewer a fact they can categoriseA paragraph of background before the event is namedOne sentence, no adjectives, starting with the event
3. WhenLetting the reviewer line the letter up against the statement"Earlier this year", "a few months ago"Two dates, matching the attached documents
4. WhyLetting the reviewer decide whether it is an event or a patternTwo paragraphs establishing that it was not the writer's faultOne sentence with a plain cause, and nothing about fault
5. Where it stands nowAnswering the question underneath the question: is it overSilence, because the writer assumed it was obviousThe current position and the date it resolved
6. AttachmentsTelling the reviewer what to read and in what order"I can provide documentation if required"A numbered list, with dates, of things that are actually enclosed

Copyable template

Before — a weak letter, as written

Dear Sir or Madam,

I hope this letter finds you well. I am writing about the question raised on my application regarding my bank account. I want to be as transparent as possible.

Earlier this year I went through a difficult period following an unexpected change in my circumstances, and there were a few months where things were tight. I want to assure you that this was very much a one-off and not at all typical of how I manage my finances, which I have always taken seriously.

The deposit you asked about was a generous gift from a family member who wanted to help. I am very fortunate to have their support. It is definitely not a loan and there is no expectation of repayment.

Things are much more stable now and I am confident this will not happen again. I can provide bank records or anything else you need. I would be very grateful for your consideration and I hope this resolves the matter.

Sincerely,
A. Applicant

Second tool

After — the same facts, rewritten

22 August 2026

Marcus Bell, Summit Credit Union Underwriting
Re: Loan 4471-88203 — Condition 14 — Letter of explanation

This letter answers Condition 14, which reads: "Provide a signed letter of explanation and source documentation for the $12,412.63 deposit to account ending 4417 on 3 July 2026."

The deposit of $12,412.63 to account ending 4417 on 3 July 2026 was a gift from my mother, Sunita Raman, toward the down payment on this purchase.

The funds were transferred from her savings account at Third Coast Bank on the same date. No repayment is owed or expected, and no obligation arises from them.

Attached in support:

  1. Statement for account ending 4417, July 2026, showing the deposit on 3 July.
  2. Third Coast Bank transfer confirmation dated 3 July 2026.
  3. Signed gift letter from Sunita Raman dated 5 July 2026.

Everything stated above is true to the best of my knowledge.

Signed ______________________  Date ____________

Priya Raman — Loan 4471-88203


What changed, line by line:

  - The greeting became a reference line carrying the condition and the file number.
  - "A difficult period" came out entirely; the condition was about a deposit,
    and the account history was never asked about.
  - "Earlier this year" became 3 July 2026.
  - "A generous gift from a family member" became a named donor and a relationship.
  - The rounded figure became the statement figure, to the cent.
  - "I can provide bank records" became three numbered attachments.
  - The request for consideration came out. Nothing was being decided by this letter.

Avoid

Common mistakes

  • Starting with prose. The facts then have to be extracted by the reader, and a letter that has to be mined is a letter that gets set down.
  • Explaining fault. A reviewer is categorising an event, not assigning blame, and the paragraphs establishing that it was not your fault are the paragraphs that raise questions.
  • Writing about a topic when you were asked about an item. A condition about one deposit on one date is not an invitation to describe your finances.
  • Promising it will not happen again. It is unverifiable, it is not what was asked, and it draws attention to the possibility that it might.
  • Ending with a request. The application is the request; the letter of explanation is a fact, and asking for a decision in it reads as pressure.
Self-service boundary

ApprovalPrep does not write your letter, decide what happened, contact a reviewer, or clear a condition. This page gives you a method and a worked rewrite. You state only facts you can support, sign it yourself, and send it yourself.

Primary sources

Check the current instructions.

Consumer Financial Protection Bureau — Owning a Home

Open official or primary source →

Freddie Mac — Single-Family Seller/Servicer Guide

Open official or primary source →

U.S. Department of Labor — Employment Verification

Open official or primary source →

Questions

Before you buy

How do I start a letter of explanation?

With a reference line that quotes the condition or request in the reviewer's own words, alongside the file, loan, or case number. That single line is what lets a processor match your letter to the open item without reading the rest of it.

How long should a letter of explanation be?

Six sentences for most requests: reference, what, when, why, where it stands now, and the attachment list. If it runs longer, that is usually a sign it is answering a topic rather than a question.

What should I not put in a letter of explanation?

Apology, gratitude, fault, promises about the future, anything about a subject that was not raised, and any request for a decision. Each of those either does no work or opens something.

How do I explain something that was not my fault?

State the cause in one sentence and move on. Reviewers categorise events; they do not adjudicate them, and the paragraphs written to establish innocence are the ones that make a short question look like a long story.

What is the stranger test?

Read each sentence and ask whether it would still be true if a stranger sent it about a different situation. "I want to be as transparent as possible" passes that test, which means it says nothing about you and should come out.

Do I have to write it myself?

You have to sign it, and it has to be true, so writing it yourself is the straightforward path. ApprovalPrep gives you the structure and the prompts; it does not write it for you, contact anyone, or send anything.

Next step

Keep the editable version: Letter of Explanation Kit.

You need one downloadable kit with multiple explanation-letter templates for credit, income, employment, address, rental, late-payment, bank-statement, life-event, or general application questions.

Everything on this page is free to use and copy. The kit is the paid, downloadable version at $39, paid once: a PDF guide plus editable DOCX files you keep, covering 9 named documents including credit explanation letter, income gap explanation letter, employment gap explanation letter.

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