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Veteran with Purchase Contract and 4 Recent Late Payments in Past 12 Months
Case Scenario With Active-Duty Veteran Under Home Purchase Contract in Maryland Needing to Close With a VA Loan. Lately, there have been many homebuyers with late payments in the past 12 months.
The borrower called me early this morning. I want to help the borrower and submit it to Toni at Jet Mortgage. She is under contract on a $520,000 home. Needs to close on October 15, 2026—VA loan. Middle credit score is 605 FICO. Makes $16,000 per month; active-duty military. Has four late payments in the past 12 months with good reasons due to deployment/moving to a different base. During this time, while she was moving between military bases, her husband experienced unemployment, and she took time off for maternity leave. Toni, can you please detail the content of the letter of explanation to the underwriter and what things to cover
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2 Replies
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Introduction and Purpose
The letter should begin with the borrower’s name, loan number if applicable, and the property address. Include a brief opening statement indicating that this letter explains the four late payments that occurred within the past 12 months.
Chronological Explanation of Events
The body of the letter must map each late payment to a specific military or life event in chronological order. For the first late payment, explain that it occurred during a Permanent Change of Station move from one base to another, and reference the specific dates involved. For the second late payment, describe how it coincided with the spouse’s unemployment period that resulted from the mandatory relocation. The third late payment should be connected to the maternity leave period following the birth of the child. The fourth late payment should be tied to any remaining transition difficulties during this period. Each event should reference specific months and explain how the sequence of military orders, spousal job loss, and family medical leave created a compressed timeframe of financial strain.
Explanation of Causation
For each late payment, the letter should explain three elements. First, describe the triggering event, such as receiving PCS orders to a new base and the 30-day transition period that followed. Second, explain the financial impact by noting when the husband’s employment ended due to the relocation and the specific income gap that resulted during that timeframe. Third, clarify why the specific payment was missed by stating that, despite prioritizing housing and vehicle expenses, the credit card or auto loan payment was delayed due to cash flow timing issues during the move.
Resolution and Current Status
The letter should state when and how each account was brought current. Confirm that all accounts now show current or paid as agreed status. Include a clear statement that all accounts have been current since a specific date with no further delinquencies occurring.
Mitigating Factors Specific to Military Service
The letter should explicitly address factors that VA underwriters view favorably. State that these late payments occurred solely during periods of military-mandated relocation. Emphasize that despite temporary disruptions, military income has remained consistent at sixteen thousand dollars per month for the duration of service. Note that the Basic Allowance for Housing covers a substantial portion of the proposed mortgage payment. Clarify that prior to these twelve months, credit history reflects multiple years of consistent on-time payments, demonstrating that this was an isolated event rather than a pattern of financial irresponsibility.
Future Risk Mitigation
Address how this situation will not recur by stating that the husband secured employment at the new location on a specific date, thereby adding additional income to the household. Mention that automatic payments have been established for all accounts to prevent future oversights. Note that an emergency reserve fund has been established covering three to six months of expenses.
Required Supporting Documentation
The letter must be accompanied by several key documents. Military PCS orders must show the exact dates of relocation. Leave and Earnings Statements for the past twelve months must demonstrate consistent income throughout the period. A letter from the commanding officer verifying deployment or PCS dates and circumstances is strongly recommended. Documentation of spousal unemployment should include a termination letter citing relocation as the reason, if available. Maternity documentation may include the birth certificate or relevant medical records. Current account statements must show all accounts now in good standing. Bank statements should verify liquid reserves remaining available after closing.
VA-Specific Underwriter Considerations
The submission should highlight that the borrower likely exceeds residual income requirements by a significant margin, given the $16,000 monthly gross income. Since the six hundred five credit score is below the six hundred twenty threshold that many lenders prefer, the submission must emphasize strong compensating factors. These include a low debt-to-income ratio, which should be calculated and highlighted, significant liquid reserves, and the stability of military service income, which is essentially guaranteed employment. The combination of military PCS orders, spousal unemployment, and maternity leave constitutes classic extenuating circumstances under VA guidelines. The file will likely require manual underwriting due to the credit score below six hundred twenty and the multiple late payments, but the service-connected nature of the credit issues should support approval.
Tone and Format Recommendations
The letter should be limited to one or two pages maximum. The tone should remain factual rather than emotional, avoiding defensive language. It should be written in the first person by the borrower rather than the loan officer. Specific details should include exact dates, dollar amounts, and account numbers, limited to the last 4 digits. The borrower must sign and date the letter.
Additional Submission Notes
When submitting to underwriting, include a brief cover memo highlighting that this is an active-duty service member with credit issues directly attributable to PCS relocation and family transition, with high residual income and compensating factors present. Calculate the debt-to-income ratio to show that with sixteen thousand dollars in monthly income and a five hundred twenty thousand dollar purchase price, the housing ratio is approximately twenty percent, which is excellent. Emphasize that although the 605 score is low, VA loans do not have a minimum score requirement, and the compensating factors should carry the file. Ensure the letter of explanation is dated within thirty days of submission to meet timing requirements for the October fifteenth closing date.
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This file deserves an immediate underwriting review, but the information provided is not enough to predict approval or an October 15 closing. The most important missing detail is whether these were four separate 30-day late payments, a single account progressing to 60 or 90 days late, or late housing payments.
A 605 score does not automatically disqualify her. VA does not establish a minimum credit score, although the lender may impose one. High income helps with affordability, but it does not resolve the credit concerns by itself. Veterans Affairs
Here is how I would advise Tina and Toni:
Review the actual late-payment history first
Before preparing the letter, identify:
- Each creditor, account type, and month reported late.
- Whether each delinquency was 30, 60, 90, or more days.
- Whether the four lates occurred during one temporary hardship or across unrelated periods.
- The date each account became current and payment history since then.
- Whether rent or mortgage payments remained current.
- Any other unresolved derogatory credit.
Four late payments concentrated during a documented disruption present a different underwriting picture from repeated delinquencies continuing after the disruption ended. Neither situation should be characterized as an isolated event without reviewing the report.
VA generally considers satisfactory credit reestablished after 12 months of satisfactory payments following resolution of the last derogatory item in circumstances not involving bankruptcy. Therefore, recent late payments require careful analysis; “good reasons” alone do not establish acceptable credit. benefits.va.gov
What the borrower’s explanation letter should cover
The borrower should write a factual, signed, dated explanation with a clear timeline. It should address five points:
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What happened and when. Give the deployment, permanent change of station, spouse’s unemployment, and maternity-leave dates that actually relate to the missed payments.
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How those events caused each delinquency. Explain whether the issue involved reduced household income, delayed military allowances, relocation expenses, or a documented payment-management problem. Simply stating “I was deployed” does not explain why an account went unpaid.
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When the accounts were brought current. Identify the cure dates and attach evidence where available.
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What has changed financially? Describe current income, resolved relocation costs, and the spouse’s current employment status. If the spouse remains unemployed, explain how the household now manages expenses using the borrower’s verified income.
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What prevents recurrence. Describe measures actually implemented, such as automatic payments, payment alerts, an emergency reserve, or a household budget.
Clarify the maternity-leave issue. Do not assume leave reduced her military pay. If her pay continued, the letter should accurately explain what financial or administrative disruption occurred rather than claiming an income loss.
Supporting documents to send securely
The explanation will be more useful when the lender can verify its timeline. Depending on what actually happened, collect:
- Deployment and PCS orders.
- Current and relevant historical Leave and Earnings Statements.
- Documentation of the spouse’s job loss and subsequent employment, if applicable.
- Relevant bank statements showing income changes, payment attempts, or account cures.
- Creditor statements confirming current status.
- Rental or mortgage payment history.
- Asset statements showing available funds and reserves.
Provide these through the lender’s secure document channel.
How to structure the letter
Use this as an outline, with the borrower supplying the facts:
Re: Explanation of late payments
I am explaining the late payments reported on [creditor/account ending in XXXX] for [months and delinquency severity].
From [date] through [date], [describe the documented events]. These circumstances affected my ability to make the payments because [specific explanation connecting the events to the affected accounts].
I brought [account] current on [date]. [Describe subsequent payment history accurately.]
The circumstances have now changed as follows: [current income, employment, relocation, and household-expense facts].
I have implemented [actual payment safeguards]. Attached are [documents supporting the explanation].
[Borrower’s signature and date]
What Toni should confirm immediately
Ask Toni to obtain an underwriter’s preliminary review of the complete credit report and supporting documents, and confirm:
- Jet’s current VA score and recent delinquency requirements.
- The automated underwriting findings and whether manual underwriting is required or available.
- Verified qualifying military income, including whether allowances will continue at the new duty station.
- Total housing payment, other debts, household size, childcare expenses, and VA residual income.
- COE, entitlement, occupancy, appraisal status, and remaining closing requirements.
I would request a contract extension now if the appraisal or underwriting review is still outstanding. With roughly 12 days remaining, the borrower should have a realistic contingency.
The practical recommendation is to submit the documented scenario promptly and let underwriting determine whether the credit is acceptable. An explanation letter supports that decision; it does not guarantee an exception or approval.
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