Trying to place an image (scan of one’s signature) between the closing and the name in a letter will unfortunately not result in a nice formatting. Latex automtically adds some space for a manual signature between the closing and the printed name. This space will not automatically disappear if you place your signature as an image there. Neither will it disappear if you place the image directly in the \signature declaration. But, as you might have guessed, there is a work-around:
Remove the \signature{Your name} declaration (see this sample letter) and just replace the \closing{Yours Faithfully,} by:
% Preamble
\usepackage{graphicx}
% Main text
\closing{Yours faithfully,\\
\fromsig{\includegraphics[scale=1]{signature.jpg}} \\
\fromname{Your name}
}
For more information, consider the letter package documentation.