If you are in the process of getting your home loan mortgage approved, you may be asked to supply a Letter Of Explanation To Underwriters. If you are not informed or don’t have the proper loan officer, this could potentially set you up for disaster and possibly a denial of your mortgage application. Letter Of Explanation To Underwriters is a very common request that underwriters will make during the mortgage approval process. Underwriters will require a letter of explanation from mortgage loan applicants to explain all the derogatory items that are reported on the loan applicant’s credit history. Examples of the items include: Bankruptcy, Foreclosure, Deed in Lieu of Foreclosure, Collection Accounts, Charge Off Accounts, Late Payments, Irregular Withdrawals or Deposits in your bank accounts, gaps in employment, bonus income, or any other irregular items that may arise. Letter Of Explanation To Underwriters are created and submitted in an attempt to explain away the mortgage lending risks that may have arisen during the approval process. For example if when verifying your income, the underwriter sees that there was a year where you had significantly lower income, a letter of explanation should show that you were working part-time or were underemployed. Another scenario may be if you happened to be late on payments for a few months in your history, but this was due to the fact that you had a medical injury and couldn’t work. A Letter Of Explanation To Underwriters would provide a note from your doctor, doctor bills, or hospital bills showing the extenuating circumstances that arose.
Letter Of Explanation To Underwriters also known as LOX or LOE doesn’t need to be written like a novel for the mortgage underwriter read. What you need to keep in mind is that you should keep it short and sweet and only go into details where it is needed and warranted. In most cases a few sentences or a short paragraph is sufficient as well as being accompanied by supporting documents if needed. When you are finished with putting this together you also must make sure you sign and date the letter of explanation.
When you are writing these letters of explanation there isn’t a pass or fail given from the underwriter but just giving clarification and details needed in order for the underwriter to assist in making their decision while being 100% informed. Another example where the underwriter will question you could be as to why there are a large number of inquiries on your credit history. If this is happening because you are shopping for a mortgage, all your LOX has to be is one sentence and that is sufficient. Just always keep in mind you are not in school and don’t need to hit a minimum amount of words. If you find yourself writing too much, hopefully you have an experienced loan officer like myself who will help you in condensing your letters of explanation down because I know what the underwriter will be looking for as well as the format.
If you need an experienced loan officer who can help you navigate this part of the mortgage approval process, you need to reach out to me and apply today. I can be reached at888-900-1020, by email at firstname.lastname@example.org, or you can apply at www.loanconsultants.org.