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Guide to writing a mortgage letter of explanation (Template)



Your lender asked for a letter of explanation. What now?

When you apply for a home loan, your lender will do a deep dive into your financial history. Depending on what it finds in your bank statements or credit report, additional documentation may be necessary.

You may be asked for a “letter of explanation” during the application process. Fear not. Letters of explanation are fairly standard and nothing to worry about.

However, you want to make sure you write this letter correctly, as it could be crucial to your mortgage approval.

Here’s everything you need to know so you can hit a home run with your letter of explanation.

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What is a mortgage letter of explanation?

Commonly referred to as an ‘LOE’ or ‘LOX,’ letters of explanation are often requested by lenders to gain more specific information on a mortgage borrower and their situation.

An LOX can necessary when there is inconsistent, incomplete, or unclear information on a loan application.

Letters of explanation may be required if any red flags turn up during the underwriting process, such as:

  • Declining income
  • Gaps in your employment history
  • Differing names on your credit report
  • Large deposits or withdrawals in your bank account
  • Recent credit inquiries
  • An address discrepancy on your credit report
  • Derogatory items in your credit history
  • Late payments on credit cards or other debts
  • Overdraft fees on an account

There are many other situations where an LOX may be requested, too.

If you need to write one, be sure to ask your loan officer what exactly the underwriter wants to see, and whether you need to provide any supporting documentation along with the letter.

How to write a letter of explanation for your mortgage lender

When it comes to mortgage letters of explanation, less is typically more.

Too much unnecessary information may lead to confusion, or at minimum, additional questions about your file — questions that may have been avoided if it weren’t for some of the details in your letter.

The most important elements of your letter of explanation should include the following:

  1. Facts — Be honest. Never be tempted to write a letter based on solely on what you may think your lender wants to hear. You shouldn’t fabricate any aspect of your letter. Include correct dates, dollar amounts, and any other pertinent details for your situation
  2. Resolution — Your lender wants to know how and when the situation that led up to certain events was resolved. For instance, if you were temporarily furloughed during COVID, but you’ve since returned to full employment, you should be able to document your recent paystubs and have your employer verify that you’ll continue working full time for the foreseeable future
  3. Acknowledgement This one is important and shouldn’t be left out of your letter. Mortgage underwriters want to know why it is that something happened, and how or why it won’t happen again in the future

Remember that a letter of explanation is a professional document that will go into your loan file.

Be mindful of things like spelling, grammar, and punctuation. Create a letter that’s visually appealing, properly formatted, and communicates the relevant information.

Providing additional documentation with your letter can be helpful. For example, if hospitalization was the culprit behind some missed payments on your credit report, it may be helpful to include hospital bills.

Sample letter of explanation and template

Remember to be honest, formal, and concise when writing a letter of explanation for your mortgage lender.

The exact content will vary based on your situation, but here’s a general letter template you can use as a guide. (Click the image to open a PDF version.)

Remember to include your mailing address, phone number, and the number of your mortgage loan application (or the property address for which you’re applying).

Final advice on writing a letter of explanation

You’ll be asked to submit a pile of documentation during the mortgage loan process, including bank statements, tax returns, pay stubs, and more.

Depending on your financial situation, your lender may also request a letter of explanation. Many first-time home buyers think being asked to provide a letter of explanation means their mortgage application may be doomed.

Remember, this type of request is usually a good thing. The underwriter may be looking for this last item before signing off on your final approval.

When your lender requests a mortgage letter of explanation, remember this first: don’t panic.

Next, double-check with your lender on exactly what is being requested.

Then write a clear, concise letter that’s free of emotional language, negativity, or excessive detail. There’s a good chance that the next time you hear from your lender, it will be to let you know you’re fully approved.

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Are Sallie Mae Student Loans Federal or Private?



When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances



Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit



Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.



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