When applying for a home loan through the Federal Housing Administration (FHA), it is sometimes necessary to write a letter explaining any credit difficulties you have had in the past. The FHA does not lend the money directly to the home buyer, but rather insures the loan made from the bank or other financial institution. Essentially, the FHA is guaranteeing the bank that the loan will be paid.
Get a copy of the credit report that your lender is using. Ask the bank to send you a copy, or have a copy mailed to you.
Make notations on your credit report of anything you believe is incorrect. It is important that you are able to prove that these items are incorrect, so that they don't count against you.
Make a list of positive reasons that you chose this home and location.
Make a list of the reasons you have negative items on your credit. If you had a personal challenge, such as a divorce or medical issue, it's important to be honest about it. The fact that you overcame the issue and are now on the road to financial and personal recovery should be a source of positive motivation in the letter.
Write a first draft of your letter. If you have family nearby, then say so. If you are about to start a family or have other motivations, then it is important to let the lender know this. These items won't negate a poor credit history, but they will show that you intend to stay in the home and make it your primary residence for a long time.
Ask someone you trust and respect to read over the letter before you make a final draft. This could be anyone from a parent, former teacher or professor or to a friend that is known to be well-written. You don't have to take all of their advice, but they may be able to point out places where you can strengthen your letter.
Rewrite your letter in a word processing program on a computer. Use proper business letter format (see Resources).
Keep your letter to no more than one or two typewritten, double-spaced pages. It's important to be thorough, yet concise when presenting your information.