I'm a lawyer and my husband is a doctor. We have astronomical student loan debt from a top law and medical school. We have been searching for a hard money lender or a bank who warehouses their own loans because we don't qualify as conventional buyers for a multifamily. Our debt to income ratio wouldn't be touched by any bank that sells off mortgages in the secondary market. My credit score is well over 800 and I'm fairly liquid (easily can put down 25-30% on a multifamily).

We need to borrow from a hard money investor OR a small bank.

Option 1: Hard money investor

My mom has been in real estate for years, and she referred me to her old friend, who referred me to a commercial loan officer (my mom also knows) who has a private investor who will work with us. His interest rates are reasonable at 5-6% *likely 5.2%*, and he may also be able to qualify us for a 25 year fixed rate loan between 7-8%. We haven't gotten all the details on the exact product he'll put together for us. I'll find out tomorrow after the loan officer pulls my credit. I know that this lender can lend the hard money in 4-6 weeks. The investor sometimes does have a prepayment penalty of either 5,4,3,2,1 or 3,2,1. We can refinance after 6 months. He will consider ARV.

Here's the concern: The loan officer charges a flat fee of $3500. He requires a $500-1000 retainer (likely $500 because of his history with my mom) that I don't play on paying him until I put in an offer. It's 80% refundable, so if the deal falls through, I pay $100-200. This is an old friend of my mom's. He's been in the business for 20 years. I'm just wondering if this is outlandish or on par with the industry standard. His debt to service coverage ratio is 1.25%.

This first purchase is smaller than the investors usual investment, but he knows the potential of future business when my husband and I quadruple our income in 2019. The investor is very interested in us, and generally enjoys our character and business skills. 

Option 2: Bank that warehouses their own loans.

I'm working with another loan officer who works with banks and doesn't charge a specific fee. (I think he gets about $300 per transaction). However, the banks terms will not be as favorable as the private lender. We don't have any specific bank in mind, but I meet with him later this month to go over our options.

FYI we're purchasing in NW Indiana and we do not have a specific property lined up at the moment. Inventory is tight and we're working on finding one fervently.