If there are large deposits the underwriter will ask for a signed letter of explanation from the borrower along with supporting documents.

We attach somewhat of an explanation with it (luxury and historic homes) but bottom line it's totally arbitrary.

Note I have every intention of doing exactly what I told them I would do and I suspect every tenant has believed I would do as I say because their interactions with me would not lead them to another determination.This explanation combined with good screening and some good luck has so far resulted in no need to evict anyone in 50 years.  

This is how it is supposed to be handled but some lenders have overlays or loan officers are not aware of the actual guide lines or rules depending on their organization or who they are selling the loan to in the correspondence channel.I have come accross this several times you simply make the underwriter aware and in some cases the agents and appraiser are informed as well in case there is a need for an outside LOE letter of explanation. 

@Brent Coombs Thanks for the explanation.

Going in will really help you get a much clearer explanation of what is going on and what is needed to remedy. 

The reasoning, as I remember, was some combination of 1031 exchange, increasing ROE, and leverage.Does anyone have a good resource or explanation summarizing the logic?

@Natalie Bender, great explanation of DSTs. 

The impression that I got is a pragmatic explanation of the situation.

Here's a fundamental explanation to get your juices flowing:Assume a house costs $200,000 and rents for $1,500.