The first step in applying for a loan that exceeds 25% of the worth of your home is to ask, “Why do I really need to borrow more than my home is worth?” If you can answer this question, then you might be approved for this type of loan.
This is probably the riskiest loan that a lender can make; therefore the credit criteria will be stiff. Be prepared to explain why you feel this type of loan will work for you. Remember, lenders are in the business to make good, sound credit decisions that make sense. If the loan doesn’t make sense you will be declined. So do your homework first and make sure that this type of loan actually makes sense from a lender’s perspective.
Normally lenders that lend on this type of risky percentage of value will want to offset the risk with good credit, solid employment, and a really good purpose. When they ask you questions about 125 secured loans, some of the valid reasons you can give for wanting one will be increasing the value of the home with an addition, or improvements that will bring the value up to normal lending standards within a short period of time. If the loan purpose doesn’t have some good strength to it, it will be declined. Does the purpose make sense? Are you credit worthy and can support an increase in the value within a short period of time? Do you have stable employment? Chances are if you look at the request from the lender’s perspective, you will be able to support the request. Always look for an exit strategy within a short period of time.
There are valid reasons for this type of credit or lenders would not be offering it. Do your homework and find out what under what criteria a lender will actually advance you a 125% secured loan. Remember, there is a price attached to risk, so you will be paying a premium for this type of credit. You need to ask yourself, “Do I really need to pay top dollar for a loan now when I can be conforming within a short period of time?” You may decide it is better to wait.