What Is a Letter of Motivation for a Mortgage?

If you thought your days of writing essays ended when you graduated college, think again. When you apply for a mortgage, your lender may want a letter of motivation – a written account of why you want to buy that particular house. A lender may also ask for one if he has questions about your financial history. Some lenders may be happy with a short answer, but others like lots of detail.

Mortgage lenders actually have good reasons to ask why you want to buy the house. When you're buying your personal home, banks look at you differently from when you want a second home or a rental property. Personal home-buyers can get better mortgage rates and lower down payments, which gives some an incentive to lie. If, for instance, you buy a smaller home within a few miles of where you live now, that may raise the underwriter's suspicion that it's really a rental.

The letter is a chance for you to satisfy any concerns your lender has about your intentions or your financial history. If the lender requests a letter, he'll tell you what he wants you to explain. For example, if you've had a bunch of credit checks made in the past few months, the lender may want written reassurance that you're not planning to make lots of credit purchases. If you've had a stretch of unemployment in your past – even if you're working now – the underwriter may ask about that too.

Just because a lender asks you a question doesn't mean he has a right to an answer. For instance, it may seem reasonable on the surface for a bank to ask if you plan on having kids – especially if you're looking at a four-bed home and it's just the two of you – but basing lending decisions on family status violates federal law. You have every right to refuse to give out this type of information.

If you think your lender is asking for more information than she needs, ask her if you can skip the details. If you're a strong candidate – good credit score, plenty of money in the bank – you may get your wish. If not, either answer the questions or look for another lender. One other alternative, if you think the lender's request might be discriminatory, is to file a complaint with the federal Department of Housing and Urban Development. Basing loans on your family status, for example, is illegal under the Fair Housing Act.