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What is a comfort letter, and why might you need to submit one?

The mortgage process when purchasing a home can be tricky. There’s a ton of paperwork to read through and sign–so much that your hand might cramp up from the vast amounts of signatures required. But don’t worry if your mortgage lender requests that you write a “comfort” letter—it’s just a statement clarifying your financials so the lender can get you to the closing table with minimized risk.

As to what the mortgage lender might want to clarify, it could be a number of things:

Employment Lapses
Is there a period of time in which you weren’t working recently? The lender may ask you about this lapse to ensure you’re still a stable loan candidate and financially comfortable with paying back the loan once you close on the home. You may have worked freelance during this time, in which case the lender may ask for proof of income.

Large Bank Deposits
Did you recently come into a large sum of money? If you deposited it into your bank account, your mortgage lender may ask you where that money came from and what you plan to use it for. There are strict rules about using gifted funds toward the purchase of a home, and your lender will want to confirm it’s not a loan given to you by friends or family that you’ll need to pay back.

New Job Status
Are you switching jobs in the middle of the loan application? If there’s a change in income, this could add another layer of questioning. Your lender may want you to state how much you’ll be making at the new job, as anything less than your current income is going to change how much you can afford. The lender may also want to know where the job is located—if it’s further away from where you live, will you be commuting or working remotely? The lender just wants to ensure you’re a legitimately viable loan candidate.

A comfort letter is a way for your mortgage lender to cover its bases. If you’re completely open about your financial history when applying for the loan, you have nothing to worry about. So, don’t panic. Just provide the requested information in a timely fashion, and you should be good to go.

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