Mortgage LOX Maker: Declining Income Letter

Make your own Letter of Explanation (LOX) for declining income. Explain a year-over-year drop in earnings on tax returns or paystubs for mortgage applications. Generate instant PDFs for your lender with digital signature capture.

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Your Information

Borrower Name*

Borrower Email Address*

Borrower Phone Number*

Lender Name*

Reason for Income Decline*

Brief Explanation*

Borrower Signature*

Signature Date*

Letter Preview

To: {{lenderName}}

I, {{borrowerName}}, am writing to explain the year-over-year decrease in my income.

The decrease was due to {{declineReason}}. {{explanation}}

My income has since stabilized.

{{borrowerName}}
{{borrowerEmail}}
{{borrowerPhone}}

Borrower's Signature: {{signature:borrowerSignature}}
Date: {{signatureDate}}

Tips for Success

Keep explanations brief and factual
Attach supporting documentation when possible
Review all information before signing
Submit within 48 hours of your loan officer's request

Important Reminders

All information must be truthful and accurate
False statements may result in loan denial
Keep copies for your records
Contact your loan officer with questions

Borrower Name*

Borrower Email Address*

Borrower Phone Number*

Lender Name*

Reason for Income Decline*

Brief Explanation*

Borrower Signature*

Signature Date*

When To Use A Declining Income Letter

Reduced Commissions or Bonuses

Your base salary stayed steady, but your commissions, bonuses, or overtime were lower than the prior year because of slower business activity.

Industry Downturn

Your industry slowed down or contracted, which reduced your hours, billable work, or variable pay.

Job Change With a Lower Starting Salary

You switched employers or roles and accepted a lower starting salary, with the expectation of growth, equity, or career advancement.

Family or Medical Leave

You took partial-year leave to care for a child, family member, or your own health, which reduced your earned income for that year.

Loss of Secondary Income

You stopped working a second job, side business, or rental that contributed to the prior year, while your primary income remained stable.

Pandemic or Economic Disruption

A one-time economic event temporarily reduced your hours or pay, and your earnings have since returned to normal.

Common Scenarios Requiring Multiple Letters

Declining Income + Self-Employment:

Use this declining income letter to explain the drop in reported income
Use our self-employment business loss letter if a business loss caused the decline
Use our self-employment verification letter to confirm current business status

Declining Income + Employment Gap:

Use this declining income letter to explain the lower full-year earnings
Use our employment gap letter to explain any time out of work

Declining Income + Career Change:

Use this declining income letter to explain the lower starting salary
Use our employment gap letter if there was time between roles

How to Use This Declining Income Letter Generator

Gather Your Information

Collect all necessary details and supporting documentation before starting the generator.

Complete the Form

Fill out all required fields in the generator. The preview will update in real-time as you type.

Review and Sign

Review your letter for accuracy, add your digital signature, and download the PDF.

Submit to Your Lender

Send the completed letter to your loan officer along with any supporting documentation.

Declining Income Letter Questions

Common questions about declining income letters and how lenders use them.

When will I need a declining income letter?

Your loan officer will request a declining income letter when your tax returns or W-2s show that your income decreased from one year to the next. Lenders want to understand whether the decline is permanent or one-time.

How much of an income drop triggers a letter?

Most lenders flag any year-over-year decline, but a drop of 10% or more almost always requires a written explanation, especially for self-employed and commission-based borrowers.

Will declining income disqualify me from getting a mortgage?

Not by itself. Lenders typically use the lower of the two years to calculate qualifying income, but a clear written explanation, plus year-to-date evidence that earnings have stabilized or recovered, often allows the loan to move forward.

What if my income is still going down?

If your income is on a continued downward trend, lenders may use a more conservative income figure or ask for additional documentation. Be honest about the cause and provide year-to-date evidence of where your income stands today.

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