Bank mortgage Vs Private money lender

[Connor Fortenbacker]

Good afternoon,

I’m currently looking to purchase my first investment property in the coming months. This will be my first investment property and I want to live on one side while renting out the other side. I have an excellent credit score. With interest rates being so high, I wanted to know if I should look to get approved for a mortgage at a traditional bank or a private money lender? Any advice would be greatly appreciated. I’m location in NJ (if that’s makes a difference or not). Thanks in advance!

[Doug Smith]

It really depends on the type of loan you're going for. I was a banker for half of my 32 year career and a broker for half, so I know both sides inside and out. If you're looking for a conventional/FHA/VA/USDA loan, or more of a hard money (we like to call them bridge loans), then a broker is the way to go most of the time. If you have a sizable relationship with a community bank, then they will be somewhat competetive with a loan that is 5 years or less in term. If you walk into a big bank's branch and ask for a loan, they might struggle to spell the word "application". Brokers don't handle loans for operating entities...that's what a bank is set up for, but banks are not really set up to handle real estate investors. While they might offer conventional mortgages, they usually have a lot more built into the pricing to cover overhead. To sum up, if the loan is for an operating entity (business with cash flow not coming from rents), then a community (not a big) bank is your best bet. If the loan is going to be paid back by the income from the property or if you are going to live in the property, a broker usually will have the advantage. Good luck to you.