No Excuses – Just Brief Explanations

What if the underwriter asks you to write a letter of explanation (LOX or LOE)?

You have a story – here is your chance to talk for your numbers.

Large Deposits

When the underwriter reviews your bank statements and sees a large deposit, something out of the ordinary every day business, they will want to know where the money came from and what the funds will be used for.

Did you sell one or more of your assets? Car, RV or furniture? The underwriter will want copies and verification of the source.

  • Bill of Sale
  • Personal or Certified Check
  • Blue book value
  • Take pictures
  • Cash is not verifiable

Cash on hand is difficult and most times impossible to track. If you didn’t claim the side work/side hustle income on your taxes – the underwriter will not be able to use the unverifiable funds for earnest money, down payment or closing costs.

Missed Payments, Collections, Bankruptcy, NSF, and Charge Offs

Why did you miss a payment? Was it a family emergency, health issue, global pandemic?

When writing your story, be brief, to the point and avoid any excuses.

Keep the details to yourself and simply state your reason for your tardiness, how you rectified your situation, and what steps have you taken so that you will not miss payments in the future.

  • Do you now have 3 or more months of reserves/mortgage payments in your savings account in case another emergency arises?
  • Do you have an extended savings plan?
  • Have you met with a financial counselor or wealth advisor and created a long term actionable plan?

LOX Templates

Large Deposit

  • Date
  • Name
  • Address
  • Loan Application Number

To whom it may concern,

Photo by Vlada Karpovich on Pexels.com

The large deposit on (date) for the amount of ($$) was received from (source). I used/plan to use the funds for (ex. payment of bills, down payment, earnest money, appraisal, closing costs).

I have included documentation of that transaction.

Thank you for your consideration,

Sign your name

Missed Payments, Collections, Bankruptcy, NSF, and Charge Offs

  • Date
  • Name
  • Address
  • Loan Application Number

To whom it may concern,

The missed payment on (date) for the amount of ($$) was missed because of (simple reason). I have (list how you have made extra payments, paid fees, etc) and am now current and making on time payments. I have taken the following steps (list steps/plan) to ensure future on time payments.

Thank you for your consideration,

Sign your name

Proofreading and Editing

Before you send your LOX to the underwriter, please make sure you have someone (educated friend or your loan officer) check for grammar and punctuation. You want all documentation to be professional.

If you have any questions feel free to text 616-566-1437 or email wendy.coon@htlenders.com\

Hometown Lenders, Inc. is an Equal Housing Lender NMLS#65084

“No Excuses – Just Brief Explanations”

Published by wendynmls1984358

Hi, I’m Wendy Schweifler NMLS# 1984358, Mortgage Loan Originator. A Country girl who loves all of Mother Earth’s gifts with a passion for animals, helping people, and laughter. Thanks for visiting!

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