Are you not financially prepared to take on the rent of a new apartment but are looking to live independently? Is your credit history subpar? Or are you unable to get employment or landlord references? Maybe it’s time to think about using a guarantor.
In the simplest of terms, a guarantor is an individual not living in the unit who elects to take responsibility if the renter defaults on rent. Guarantors are security for landlords and property managers to protect themselves from unpaid rent or damages done to the unit. Guarantors can be a family member, a friend, or any individual that is willing to take on this responsibility.
The financial requirements to become a tenant are often more than a young professional can take on. Many management companies require the combined household to maintain a gross income that is equal to or greater than 2.5 times the total monthly payment.
You may have little rental or credit history or a bad credit score. When you can’t show sufficient credit, landlords don’t have proof of your financial responsibility. Prospective tenants with bad credit may have a difficult time finding landlords willing to take on the risk, so a guarantor is a way to overcome this roadblock.
A guarantor should not be confused with a co-signer. Though these terms are used interchangeably they differ greatly in meaning.
A co-signer is another tenant and is signed into the lease with the right to occupy the unit. In layman’s terms: a roommate. This co-inhabitant is willing to share the rent, property fees, and other potential damages. A cosigner may also live in the unit and pays their portion of the rent monthly.
Cosigners must pay the full portion of rent should the other tent default on rent payment. A cosigner is responsible for paying rent unlike a guarantor who is only responsible for paying the rent should the tenant not make the payments.
A cosigner and a guarantor are equally responsible for paying rent should the tenant fail to do so.
Before you ask your favorite family member or best friend to come in as a guarantor you may want to consider this: guarantors are thoroughly vetted and screened and must make 80-100x the monthly rent.
Just as a landlord screens each applicant, the same process applies to the guarantor. This includes requiring proof of income and employment. The guarantor usually provides the last page of their most recent tax return, pay stubs, or bank statements. On top of that, the guarantor is background checked and credit checked.
If you can’t find a guarantor you know personally, don’t fret! There are services out there to help. Companies such as Insurent can act as the guarantor on your lease for a fee of about 80 percent of one month’s rent. You do need to have good credit and meet a certain income requirement to qualify for these services.
The housing market is competitive and many professionals require help. Talk to your prospective property management team to get specifics on rent criteria and screening guidelines.