When an insurance company’s underwriting department has questions about a borrower’s background, it’s becoming common to ask the borrower to write a letter of explanation to their lender, dubbed a “comfort letter.” The lender may request a letter to gain clarity on the borrower’s circumstances that were not explained in their credit or employment documentation.
The Wall Street Journal offers up some scenarios, such as a borrower who wants to buy a new home far away from their current place of employment. The lender may ask the borrower to explain, like if they intending to telecommute or has a new job. The bank may also request one if the borrower makes an unusual large deposit. They may ask for a letter to document where the funds came from. A lender may also ask for an explanation if there was a gap within employment.
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