A lot will depend on how strict your definition of “interest” is.  

There are not unified terms within the lending space to differentiate a lender like myself that lends out their own capital in defined ways secured against real estate, a lender that is more synonymous with 'hard money' that has very strict underwriting criteria and documentation requirements, a friends and family lender that may give a borrower money for the downpayment or closing costs - or even DSCR lenders that will offer permanent debt on properties.It gets confusing for borrowers.

The laws have addressed this since the 80sWe routinely still review prospect returns, some prepared by the Big 4, where there is incorrect reporting!

I think it’s fair to decline based on history of homelessness and drug use, but I’m worried I’m being too strict. 

They're unique in the Denver metro area in how strict they are.

VB is fairly strict on STRs.

Although one thing on that: my strictly commercial colleagues are all complaining that they're down 50-70% from the previous several years. 

I'd say the key things that helped me is to only work with property managers I was referred to by other investors and establishing a very strict set of checklists, guidelines, etc. that they operate under.

Most of our tenants are reasonable folks, and the buildings in A and B level communities have mostly routine issues (leaky drains, roofs, etc). 

Me and my wife flew to Houston thinking it will be routine signing event and we will be back in the evening.