Hard Money vs Private Funding vs Bank Backed

[Christopher Jordan]

I have just bought my second property. My first was a multi family about 3 years ago, the second was a foreclosure. I lived in one side of my multi family and rented the other out until I had enough to buy the next which so happened to be a foreclosure. While I was saving for the second property, it was brought to my attention the idea of "hard money lending." I did some research and am still weary of the concept. From what I have gathered, they are companies that don't have as strict of rules and regulations on lending as banks, but are not necessarily as safe as banks. Then you have the possibility of private funding. My wife has a lot of student loan debt and her DTI is too high to help in the bank backed loans route. Both of my properties are solely in my name since I have the better credit score, and lower DTI. It is becoming more prevalent to me that going only bank backed loans will be timely and possibly costly, as I could miss out on certain deals waiting to meet the more stringent bank regulations and guidelines. I am located on the Illinois side, close St.Louis, and I am curious your experience on the pros and cons of each type of lending. Along with that, I am curious how do you research a hard money lender? What are determining factors when comparing them(other than the obvious interest/apr rate, terms and capital available)? How are they better or worse than private funding?

Thank you for your insight.

Chris