What is an LOX?

A Letter of Explanation (“LOX” or “LOE”) is a formal written statement that explains a certain situation, such as receiving a gift or credit inquiries.  If an Underwriter requests a situation to be explained, a LOX is the most common way to accomplish this.  A LOX may be required up front, or during the underwriting stage of the loan, and most situations can be explained using the examples provided below.


General LOX

  • This is used to make a written general statement to the Underwriter

Bank Deposits

  • This LOX is used to explain deposits that do not have a description on your bank statement.  If you are paid with direct deposit, sometimes your employer’s name shows up on the deposit description.  In that case you will not need to explain it on the Bank Deposit LOX.
  • If you have documentation for the deposit(s) made into your account please provide it.  If you sold something, a Bill of Sale will help.
  • Please note that un-documented deposits or cash CANNOT be used for Down Payment or Closing Costs and ALL need to be explained even if we are not able to document the deposit.

Derogatory Credit

  • This is used to explain the extraordinary circumstance that happened to produce derogatory credit, and why it will not happen again.

Joint Access

  • For Bank Accounts with non applicants listed on the Bank Statement
  • When someone is listed on a bank account, they have Joint Ownership of the account.  An access letter states that you have 100% access to all funds in the account.  The letter will need to be signed by the other party that is not going on the loan.
  • Typically the person on the account is a parent that helped you to open the account when you were under the age of 18.  Sometimes there is a boyfriend, girlfriend or fiancé that is listed on the account but not going on the mortgage loan.
  • An access letter is required in any case of another party being listed on the statement.

Gift Letter

  • These cannot be generic and need to have the property address and loan number on them.  For this reason, please let us know if a gift will be used for your mortgage and we will prepare one for you to complete.

FHA Amendatory Clause

  • These are required for all FHA loans to be signed by the borrower, Realtors. and seller.
  • It is a form that says nothing regarding the transaction is going on under the table and all agreements will be disclosed in writing or on the final HUD1 Settlement Statement.
  • These are not generic and need to have your property address and loan number on them.  For this reason, we will prepare one for you to complete