# Letter of Explanation for Bank Statements: Templates - Author: TrueBankFlow (https://truebankflow.com) - Published: 2026-10-17 - Category: What underwriters check - Canonical: https://truebankflow.com/blog/letter-of-explanation-for-bank-statements > How to write a letter of explanation for bank statements that an underwriter accepts: what to include, the documents to attach and sample wording. A letter of explanation for bank statements is a short signed note that tells the underwriter what one statement item was, where the money came from or went, and which documents prove it. An accepted letter names the date, amount and account, gives one plain reason, lists its attachments and avoids anything it cannot back with paper. ## What should a letter of explanation for bank statements include? The letter should identify the exact statement line, state what it was in one sentence, and point to the proof. That means the account and last four digits, the date, the amount, the source or destination, and a list of attached documents. It ends with the borrower's printed name, signature and the date signed. An underwriter wants to match each letter to one condition and clear it. Anything that slows that match, such as a missing amount or a vague "deposits in March," sends the letter back. ### The core fields - **Header.** Borrower name, loan number if known, property address and the date. - **The item.** "Deposit of 6,200 on March 14, 2026 to checking ending 3318." - **What it was.** One sentence, in plain words. - **Where it came from or went.** The named person, business or account. - **Attachments.** A numbered list, matching the order of the pages behind the letter. - **Signature.** Every borrower on the account signs, not just the one who made the deposit. ### One letter or one per item? One letter can cover several items if each gets its own numbered paragraph and its own attachments. Many processors prefer one letter per condition so that a cleared item does not wait on an open one. Ask the lender how it wants them split. ### Tone Write like a receipt, not an appeal. The letter is evidence of facts. Feelings, apologies and promises about future behavior add length without adding proof. ## Documents to attach to a statement explanation letter Every claim in an explanation letter needs a document made by someone other than the borrower. The letter says what happened. The attachment proves it. A letter with no attachment is accepted only for small items the lender already considers routine, and even then the underwriter may ask for more. ### A matching table The table pairs common statement items with the proof that usually goes with them. Lender rules vary, so treat it as a starting list. | Statement item | Proof to attach | | --- | --- | | Transfer from another account | That account's statement showing the matching withdrawal | | Sale of a car or other asset | Bill of sale, title transfer, buyer's payment record | | Gift from a relative | Signed gift letter, donor's withdrawal record | | Insurance or legal settlement | Settlement letter or check copy | | Recurring debit to a person or company | Agreement, invoice or account statement for that debt | | NSF or overdraft caused by a bank error | Bank's written confirmation and the refund line | | Pay-later installment plans | Plan summary screens showing balance and remaining payments | Recurring debits are the item borrowers most often fail to explain, because they have stopped noticing them. [Recurring withdrawals on bank statements](/blog/recurring-withdrawals-on-bank-statements) shows how reviewers find the payments that never reached the credit report. Pay-in-four plans are a newer version of the same issue, covered in [buy now pay later on bank statements](/blog/buy-now-pay-later-on-bank-statements). ### Marking the pages Circle or highlight the line on the statement page and write the paragraph number from the letter beside it. The underwriter should be able to find the item in five seconds. ## Sample explanation letter wording for statement items The samples below show the level of detail underwriters accept. Every name, date and number in them is an example. Replace each with the borrower's real facts, keep the sentences short, and delete any line the borrower cannot support with a document. ### Template 1: a large deposit from an asset sale > Re: Deposit of 7,800 on February 9, 2026, checking ending 3318. > > On February 9, 2026 I deposited 7,800 from the private sale of my 2017 motorcycle to Dana Ruiz. Attached are (1) the bill of sale dated February 8, (2) the title transfer receipt from the state motor vehicle office and (3) the statement page with the deposit marked. ### Template 2: a transfer between the borrower's accounts > Re: Deposit of 3,000 on April 2, 2026, checking ending 3318. > > This deposit is a transfer from my savings account ending 7701 at the same bank. Attached are (1) the savings statement for April showing the 3,000 withdrawal on April 2 and (2) the checking statement page with the deposit marked. ### Template 3: a gap in deposits > Re: Lower business deposits in July 2026, business checking ending 5520. > > My shop closed from July 6 to July 27, 2026 for a floor replacement. Attached are (1) the contractor's invoice with the work dates and (2) the building manager's notice of the closure. Deposits returned to their usual level in August, as shown on the August statement. ### Template 4: an overdraft fee > Re: Overdraft fee of 35 on May 19, 2026, checking ending 3318. > > My payroll deposit posted one day late on May 19 because of a bank holiday, and a scheduled car payment cleared first. My employer's payroll notice of the holiday schedule is attached, as is the June statement showing the bank refunded the fee on June 2. ### Why these work Each one names a single item, gives one reason, and lists numbered proof. None of them argues, guesses or adds a second story. ## Explanation letters underwriters send back Underwriters return explanation letters that are vague, unsigned, contradicted by the attachments, or that explain something other than what the condition asked. The most common reason is a letter that describes a category of activity ("I sometimes get cash from family") instead of the specific line. ### Frequent faults - **No amount or date.** The reviewer cannot tie the letter to a line. - **Missing a co-borrower's signature** on a joint account. - **A source with no proof.** "Money from a friend" without the friend's withdrawal record or a gift letter. - **A contradiction.** The letter calls a deposit a gift; the attachments show a loan agreement. - **Too much.** A page of background that raises new questions the underwriter now has to ask. - **A template left unedited.** Brackets, placeholder names or the wrong month. ### A before and after A borrower first wrote: "The deposits in March were from my brother, who helps me out sometimes." The underwriter returned it. The rewrite said: "The 2,500 deposit on March 6 to checking ending 3318 is a gift from my brother, Sam Lee. His signed gift letter and his statement showing the 2,500 withdrawal on March 5 are attached." The second version names one line, one person and two documents, and it cleared. ### Fixing a returned letter Rewrite rather than add a second letter that argues with the first. Answer the exact wording of the condition. If the honest answer is that the borrower cannot document the item, say so and let the lender exclude it. That clears faster than a weak letter. ## When can an explanation letter not fix a statement problem? An explanation letter cannot fix a problem the facts themselves create. If a deposit was a loan, the debt counts. If funds cannot be sourced, they come out. If the account shows many overdrafts, a letter can give context but cannot erase the pattern. The letter helps the reviewer understand. It does not change the rule. ### Problems a letter does not cure - **Unsourced funds needed to close.** On a purchase, Fannie Mae's [Selling Guide section on depository accounts](https://selling-guide.fanniemae.com/sel/b3-4.2-02/depository-accounts) requires the lender to document that large deposits used for the down payment, closing costs or reserves come from an acceptable source. A letter alone does not meet that. - **A pattern of overdrafts** beyond the program's tolerance. - **A new debt** that pushes the debt to income ratio over the limit. - **Statements that look altered.** No letter answers that. The post on [letters of explanation that rescue bad bank statements](/blog/bad-bank-statements-mortgage#letters-of-explanation-that-rescue-bad-bank-statements) walks through which statement problems a well-built letter clears and which ones end the file. ### The refinance difference The same Fannie Mae section says documentation or explanation for large deposits is not required on a refinance, though the lender must still consider borrowed funds. Overlays differ, so confirm with the lender before telling a borrower to skip the letter. ## Who signs the explanation letter for a business account? On a business account, the letter should come from someone with authority over the account, usually the owner, and should name the company as the account holder. When several owners or signers exist, the lender may want every borrowing owner to sign. A business letter often needs the CPA or bookkeeper's records as attachments rather than personal ones. ### Business items that need care - **Owner draws and capital contributions.** State the direction and the business purpose. - **Large one-time client payments.** Attach the contract or invoice. - **Financing deposits.** If the business took an advance or a loan, say so and attach the agreement. Commercial funders have their own state disclosure duties, set out in [commercial financing disclosure laws](/blog/commercial-financing-disclosure-laws), and the agreement the borrower received will usually show the payment terms the underwriter needs. ### Catching items before the condition The best letter is the one written before the underwriter asks. [TrueBankFlow](/) marks large or out-of-pattern deposits and NSF or overdraft events with the date and statement line, and lets a reviewer attach a note to any exclusion, so the broker can draft letters while the borrower still has time to gather proof.