What is an LOX? LOX is basically “Loan Officer lingo” for Letter of Explanation.
A Letter of Explanation is simply something that the Underwriter will require during your loan process. It’s a quick explanation for a very unique, specific situation.
An LOX can be very simple, or in some cases they can be quite complex. But in either case, we are effectively putting in writing a letter to the Underwriter. You will sign and date and give this to us, and we will get it to the Underwriter.
For example, let’s say we get a bank statement from you and there’s a random $10,000 deposit on it.
An example of a good LOX for this situation would be: “To Whom It May Concern: We have a large deposit into Bank Account xxxxx, in the amount of $10,000 on April 15th. This was from our Tax Return being deposited on this date.” Sign it and date it, and that’s it!
In this example, the supporting documentation you would need is just tax returns, that’s it! That’s an LOX.