LOX…..no not what you have at the local deli on a bagel. This is an acronym in the mortgage industry for Letter Of Explanation. Please don’t ask why isn’t it LOE. It’s a mortgage industry mystery.
So, what is the LOX? Imagine you had something on your credit that wasn’t exactly perfect. You would be required to address the issue in writing. I have seen a lot of clients stress over this. The key is to keep your explanations as simple as possible. Don’t leave anything to the imagination.
It is inherent in our business to think negatively. It’s a DNA thing. With that in mind, you should begin your LOX with a simple “To Whom It May Concern” salutation.
Resist the urge to vent. You can hold the whole “the jerks at (fill in the business/bank/law firm) were out to get me” explanation for your next cocktail party. For lending purposes, simply state how it happened, how you realized the error, and how you don’t plan to have it happen again.
Boom. Done and done.
Unless it is a mortgage late payment in the past 90 days the letter will suffice. We don’t like asking for them, customers don’t like writing them, but underwriters always ask for them.
This LOX may not be as delicious, but it isn’t poison either.
Mortgage Tip of the Week: You don’t have to pay monthly PMI.
Private Mortgage Insurance (PMI) has been a necessary evil in this industry for decades. If banks had their way everyone would put 20% down. This mentality is what created the need for private insurance companies to issue defaulters insurance that covers the bank in case of foreclosure.
The easiest way to eliminate it is to buy it out all at once with a single premium policy. The cost would range and is usually converted to a percentage of the loan amount. So instead of paying a recurring payment monthly you can pay it off all at once.
The advantage is a lower down payment paired with a lower monthly payment. When you buy a property the seller can actually pay the PMI off as a sales concession. Don’t expect the rock bottom asking price, but it is a win/win for you and the seller.
Ask your Mortgage Counselor about this.