How to Write a Letter of Explanation to Mortgage Underwriters

How to Write a Letter of Explanation to Mortgage Underwriters

A mortgage loan application goes through different stages prior to loan documents being delivered to the settlement agent. 

  1. First, the applicant speaks with a loan officer who talks about employment and income, current debts and a general idea of a person’s credit history among other items.
  2. After the conversation, the loan officer will prequalify the applicant or if the applicant wants to take it a step further and receive a preapproval letter, third-party documentation needs to be submitted. 
  3. Once the application has been completed including a new appraisal report, the file moves over to the mortgage company’s underwriter. The underwriter is the person responsible for making sure the loan and supporting documents follow the guidelines for the loan being applied for.
  4. Once the loan arrives at the underwriter’s desk and is reviewed, the underwriter will likely have a few questions. Most questions will be minor while others not so much.
  5. When an underwriter has a question, the underwriter requests a Letter of Explanation, or LOE as loan officers refer to it. When an application goes into underwriting there will almost always be an LOE addressing something in the file. Even the best of loan files will have something that needs to be addressed.

Sometimes though, borrowers automatically think the worst and mistakenly believe there’s something wrong and an approval looks doubtful. But in reality, the underwriter is just following proper underwriting protocol.

LOE Example for Request for a Name Change

One of the more common requests relates to name changes or even misspellings on different documents. For example, a woman was recently married and took her husband’s last name. Instead of Jane Doe she’s now known as Jane Smith. 

When the lender accepts the application and ultimately heads to the underwriter, the underwriter will see two people on the credit report and different names on different documents. The underwriter will want something in the file explaining the name discrepancy even though it’s perfectly obvious what happened. But there’s no getting around the LOE. 

The underwriter will request that an AKA, or Also Known As document be included in the file and the borrower will write a letter.

To Whom It May Concern, or Dear Underwriter;

My maiden name was Jane Doe and got married and took my husband’s last name and today I am legally known as Jane Smith.


Jane Smith

That’s it. It might seem a bit of a waste of time but the lender must follow loan guidelines and this procedure must be completed.

LOE Example for Request for Misspellings

Here’s another common scenario. The loan application spells Jane’s name “Jayne” instead of Jane. Again, the underwriter will need an explanation letter in the file explaining they’re one and the same. Many times when information is reported to a credit agency there will be mistakes made. But whatever was submitted to the credit agency is what will be reported. The credit agency can also make a mistake and carry the misspelling.

To Whom It May Concern, or Dear Underwriter;

The correct spelling of my first name is Jayne. I do not know why there is a discrepancy.


Jayne Smith

There really is no need to get too detailed with such a minor issue and while it may seem trivial it’s still going to trigger an LOE.


Request for Mispellings Example

LOE Example for Minor Request 

Okay, but what if the issue isn’t so minor? What if the underwriter needs more information about something in the credit report, bank statements or paycheck stubs? Let’s say there is a payment listed on the credit report more than 30 days past the due date. Borrowers may be unaware of the late payment but the credit report still reports the late pay. Again, considering the overall file, it’s still a minor issue but one that can’t be ignored.

To Whom It May Concern, or Dear Underwriter;

I was unaware of the payment being late and cannot recall why it would be listed so. I have always made my payments on time and apparently this was an oversight on my part.


Jayne Smith

The LOE is fairly straightforward. Jayne didn’t know about the late payment but the rest of her credit profile is perfect. She said apparently it was an oversight and an isolated issue.

LOE Example for Major Request 

Here’s an LOE for something more important, a bankruptcy that was discharged three years ago.

To Whom It May Concern, or Dear Underwriter;

The bankruptcy filing and discharge was a combination of an extended illness in the family and lack of employment for several months. My husband is back in good health and has been back to work for full time for three years and expects to continue with his current job well into the future.


Jayne Smith

What you see with this letter is an explanation that the bankruptcy filing was basically out of the borrower’s control, the issues that forced the bankruptcy, health and unemployment, are gone and not likely to recur. 

An LOE for a major issue needs to explain what happened and why as well as the corrective steps taken to make sure it doesn’t happen again. If you receive a request for an LOE and not sure how to respond, simply ask your loan officer, explain the details and your loan officer can help craft a proper letter.


Letter Of Explanation To Mortgage Underwriter (LOX)
Letter Of Explanation To Mortgage Underwriter (LOX)

Just because your credit history might not be the best, there is always hope to get approved, and this comes in the form of a manual underwrite.  This is when an underwriter physically looks at your file and a computer program isn’t giving you a Yes or No.  When applying for a mortgage with a credit history that may include derogatory credit, bankruptcy, foreclosure, judgment, disputes, and other items that an underwriter might need clarification on, a letter of explanation or “LOX” may need to be provided.  By definition, a letter of explanation is just exactly what it says it is, and it is an explanation of why certain items got on your report, and why they will not happen in the future.

Letter Of Explanation: How To Compose

Now, when putting together a letter of explanation, these need to be very concise, brief, and must get directly to the point.  There is no need to tell your life story here because more than likely the underwriter isn’t going to read the entire thing.  They need to know what happened, why it happened, and why it will not happen moving forward.  In a scenario where you need to submit multiple letters of explanation please make sure you are only explaining the item that the LOX is for.  There is also a risk for writing too much about a certain situation as it could open up a Pandora’s box for the underwriter.  If you show to the underwriter that there are other questionable details in your LOX, they are required to look more into every detail that may affect their decision to approve your mortgage.  If this happens to you, the underwriter will probably ask for even more letters of explanation to address the new information you offered up to them.

Letter of Explanation: Example

Let me give you an example of an underwriter going through your file and requesting a letter of explanation.  If by chance the applicant has had a history of good credit and timely payments, then all of a sudden a period of late payments shows up, there will be a requirement for a letter of explanation.  If the applicant filed for bankruptcy, no matter the chapter, a letter of explanation will need to be provided.  In another situation, in terms of foreclosure, deed in lieu of foreclosure, or short sale  the reasoning can easily be that the applicant had an ARM (adjustable rate mortgage) or balloon mortgage and when the adjustment period hit, the significantly higher payment could not be afforded at the time.

These exact reasons are very common prior to the housing collapse where sub prime mortgage lenders gave home buyers teaser interest rates (rates significantly lower than their fully indexed rates per the details on the loan) and when the true rate set in, their payment would double and was no longer affordable.  Now when describing this time in your credit, the one thing that you must not say is that you couldn’t afford the home any longer and you just decided to let the house go and wait until the foreclosure finalized.  This looks extremely bad on you as the borrower, and almost 100% of the time this will result in a loan denial.

Letter Of Explanation To Underwriters: Intro

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: Format

Letter Of Explanation To Underwriters: Format

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.

Letter of Explanation: In Conclusion

Finally, the best thing you can do for yourself when submitting these letters of explanation is to give documentation that shows why things had happened, and how your situation has changed currently for the better.  The stronger the case you can make sure yourself, the better the chance you will get an approval from the underwriter.  Just remember that you need to be concise, brief, and have all your documentation submitted when creating these letters of explanation, they are the difference between purchasing a house and getting denied.  If you need help with these items or any other mortgage related issues, please feel free to call me anytime at 888-900-1020 or email me at

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