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”


Mortgage Loan Modifications


Delinquent Credit Payment History

Recent Job Change


Identity theft

Child support

Common names, or relative appearing as you

High Charge Card Balances

A lot of available credit that can be used as cash

One credit card balance rising while another decreases

Multiple Social Security Numbers

Rapidly decrease or increasing self employment income from one year to another

Federal Tax Liens

Student Loan Delinquencies


Recent judgments

Multiple mortgages

Excessive non reimbursed tax return deductions

Recent Felony Criminal charges

Relocating for work purposes

Buying a house in the same neighborhood you currently own a house

Downsizing to a lesser or changing property type such as from a house to a condo, or multi unit

Excessive non mortgage related credit inquiries

History of job gaps

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.

  1. Always emphasize if a derogatory item is medically related.
  2. Never point out negative credit items were as a result of acting irresponsible especially if there is a bankruptcy involved.
  3. Always emphasize derogatory credit was due to isolated circumstances and is a not a pattern of behavior.
  4. Always emphasize how important purchasing this home is.
  5. 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.
  6. 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.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.


  1. Joan says:

    Advice on a good letter on loe