How To Write A Good Letter Of Explanation Or LOE For My Mortgage Lender?
Advice And Tips On How To Write A Good Letter Of Explanation Sample For Mortgage Underwriters
This article on How To Write A Good Letter Of Explanation For Underwriters was Written By Gustan Cho
There is one condition you can never escape, and you will always have when applying for a mortgage. It doesn’t matter if mortgage lending guidelines are loose or strict. Even if you have the so called “Liar’s Loan,” “Stated Income,” or “No Income Documentation” mortgage. In every case you will have to have written a letter of explanation, or as mortgage underwriters, mortgage loan officers, and mortgage processors call them LOE’s or LOX’s. You can’t escape the letter of explanation.
How To Write A Good Letter Of Explanation Sample: What Is The Purpose
So what’s the big deal? How do I write one of these LOE’s? Do they really read them? The answer to these questions is maybe, and sometimes the LOX is a big deJal, and sometimes it isn’t.
Here are some examples letter of explanation sample of subjects that are a big deal”
Recent Job Change
Multiple Social Security Numbers
Relocating for work purposes
All of these subjects are a big deal to an mortgage loan underwriter and the lender making your loan. This is actually pretty easy for you to figure out why. Ask yourself, can any of the list of items listed above affect my ability to make mortgage payments? If the answer is yes, then this kind of Letter of Explanation is going to be read by an underwriter. It is a big deal! If you are asked to write a letter that concerns any of the items above, it’s a big deal.
How To Write A Good Letter Of Explanation: Minor Issues
Some Letters of Explanation aren’t a big deal. The best example of an LOE that might not be a big deal would be mortgage inquiries, or your name spelled slightly wrong. Of course the mortgage inquiry is easy to explain.
Letter of explanation sample for inquiries:
- I was shopping for a mortgage and was checking out the competition’s terms. However, after careful review I decided to go with your company.
- With credit card inquiries here is the letter of explanation sample: Shopping for a better interest rate credit card.
- With auto loan inquiries here would be a simple letter of explanation sample: Shopping for new auto to lower my auto monthly payment.
How To Write A Good Letter Of Explanation: Steps In Writing The Perfect LOE
It’s more important to focus on writing a good letter for the Letter of Explanations that really do mean something. As a general rule follow these simple 10 steps when writing an LOE, then go back and reference them: Always keep the letter short. Never have it more than 2 paragraphs. For the most part, that is even too long. If it’s a credit issue, explain why is happened, and the steps you have taken to make sure it won’t happen again. If it is minor collection, always point out that you weren’t aware of it until this process and if you are disputing it, paying it, etc.
- Always emphasize if a derogatory item is medically related.
- Never point out negative credit items were as a result of acting irresponsible especially if there is a bankruptcy involved.
- Always emphasize derogatory credit was due to isolated circumstances and is a not a pattern of behavior.
- Always emphasize how important purchasing this home is.
- If your LOE is income related or has to do with tax return issues, always blame it on bad tax advice unless you are a tax professional.
- Always provide supporting documentation if you have it to show an item is paid, or settle if it’s in question.
Borrowers who are not sure if the LOE is good, they need to ask their loan officer or Gustan Cho Associates for a 2nd opinion, before providing it to the processor.
Now, of course, the hardest rule to follow of is number 1 when following these easy steps. Again, keeping the letter short and to the point is key.
Just remember an important part of Writing a Letter of Explanation Rule:
- If not sure, always send a copy of the Letter of Explanation to Gustan Cho Associates for advice.
- IT DON’T COST NOTHING! Sometimes the best advice is really free!!
About The Author
Gustan Cho is a staff writer for Gustan Cho Associates Real Estate And Mortgage Information Resource Center. He is also a licensed loan originator with The Gustan Cho Team at Nationwide Mortgage & Realty LLC based in Oak Brook, Illinois. Gustan Cho is an expert in all areas of real estate, lending, and also is an expert in health and fitness as well as the medical field. Gustan Cho will be writing articles in the areas he is an expert in. Stay tuned for more interesting informational blogs by Gustan Cho.