Mortgage + loan prep

Letter of Explanation for a Large Deposit

Explain the source of a large bank deposit with a traceable timeline, supporting documents, and lender-specific follow-up questions.

Create a letter of explanation Compare the Loan Prep Kit

Key facts

Know the boundary before drafting.

Ask the lender which deposit, statement period, and evidence it needs.
Trace the funds from their source into the reviewed account.
Do not describe borrowed money, gifts, sales proceeds, transfers, payroll, refunds, or cash deposits inaccurately.
Use documents that form a readable chain rather than a pile of unrelated statements.

Fields to collect

Build the factual record.

Applicant and application number
Account and statement period
Deposit date and amount
Source of funds
Originating account or payer
Transaction reference
Documents attached
Contact information

Exact sequence

Prepare it step by step.

1. Identify the exact deposit the lender flagged.
2. Classify the truthful source: transfer, gift, sale, payroll, refund, loan, cash, or other.
3. Gather the documents that trace the source and transfer.
4. Ask whether a lender form, donor statement, bill of sale, or additional statement is required.
5. Write a concise explanation that matches the documents.
6. Redact unrelated account information only when permitted and retain the full copy trail.

Copyable template

Large-deposit explanation template

[Your name]
[Loan/application number]
[Date]

To [Lender or underwriter]:

I am responding to the request regarding the deposit of [amount] posted to [account description/last four digits] on [date]. The funds came from [specific source]. The transaction occurred as follows: [brief trace from origin to deposit].

I have attached [list documents] to show the source and movement of the funds. Please let me know if your review requires a specific form or another statement period.

Sincerely,
[Name]

Second tool

Common evidence by source

Account transfer: statements showing the withdrawal and deposit.
Gift: lender-required gift documentation and evidence of transfer.
Asset sale: bill of sale, ownership evidence, and deposit record.
Payroll or bonus: pay record and account deposit.
Refund: issuer notice and deposit record.
Loan proceeds: loan documents and transfer record; disclose accurately and ask how the lender treats the obligation.
Cash: ask the lender what evidence, if any, it will accept.

Avoid

Common mistakes

Calling a deposit “savings” when the money came from another source.
Submitting only the receiving statement without tracing the origin.
Creating or altering bank, gift, payroll, sale, or loan documents.
Assuming one lender’s documentation rule applies to another.
Hiding a new debt or borrowed source.

Self-service boundary

ApprovalPrep does not determine acceptable funds, underwrite a loan, contact a lender, or create financial records. Follow the lender’s exact request.

Primary sources

Check the current instructions.

CFPB — Submit documents and answer requests from the lender

Open official or primary source →

Fannie Mae — Home loan documents

Open official or primary source →

Questions

Before you buy

What counts as a large deposit?

There is no single universal number for every application. The lender identifies the deposits it needs explained based on its review and applicable requirements.

Do I need every bank statement?

Provide the periods and accounts the lender requests. Ask before sending extra sensitive records.

How do I explain a transfer between my own accounts?

Show the outgoing transaction from the source account and the matching incoming deposit in the reviewed account.

What about a cash deposit?

Tell the truth and ask what evidence the lender accepts. Do not create a false receipt or source story.

Does a clean explanation guarantee the loan?

No. It only addresses one documentation question.

Trust boundary:

No fake documents, no credit repair, no legal or financial advice, no third-party contact, and no approval promise.

Data boundary:

ApprovalPrep does not store customer letter answers, completed drafts, uploaded documents, or personal application packets.