How to Rent an Apartment with a Guarantor

Affording a rental apartment can be next to impossible for some newcomers, particularly those who prefer to rent alone, as well as recent college graduates without much credit history. With NYC’s strict income requirements (earning a salary that’s 40 to 50 times the monthly rent), it’s not uncommon for renters to seek assistance so they can qualify for an apartment. Enter “the guarantor.” Read on to get your questions answered.

What Exactly is A Guarantor?

A guarantor is someone who cosigns a lease and guarantees that the tenant will pay the rent on time and in full each month. If the tenant doesn’t pay the rent, it’s the guarantor’s responsibility to keep payments up to date.

Can Anyone Be a Guarantor?

A guarantor is usually a parent or close relative, but they must earn 80, and depending on the building, as much as 100 times the monthly rent. For example, if the monthly rent is $2,500, a guarantor must earn a minimum of $200,000 to qualify as a guarantor on the lease. Some landlords require that a guarantor lives in the tri-state area too.

What Are They Responsible For?

The guarantor is responsible for paying the full rent through the end of the lease. If several people are sharing an apartment and a guarantor signed to guarantee one tenant’s rent, and another tenant can’t make his share of the rent, the guarantor is responsible for covering the other tenant’s share of the rent too. For this reason, someone who’s considering becoming a guarantor should carefully evaluate the situation before deciding to sign on the dotted line. It’s best to know the credit history of the people on the lease before getting involved as a guarantor. Guaranteeing a lease is a substantial financial commitment.

What Does a Guarantor Have to Provide to be Approved?

The guarantor will need the same documents as the renter, which includes proof of employment, income tax returns, bank statements, and personal references.

If Someone Signs on to be a Guarantor, Will the Landlord Contact them if The Rent is Late?

One would think that the landlord would want to be paid as soon as possible and reach out to the guarantor, but that doesn’t always happen. Often the landlord does the opposite and ignores the issue, so the situation escalates, and the rent goes unpaid for months. It’s best for a guarantor to set the guidelines early on, establish a relationship with the landlord and open the lines of communication. A guarantor should ask the landlord to contact him if the rent is more than a certain amount of days late. Otherwise, $2,500 could turn into $25,000.

Besides Family or a Close Friend, is There Anyone Else Who can be a Guarantor?

Some companies will guarantee rent for a percentage of the rent, but only if the renter has excellent credit. Insurent Lease Guaranty requires that a renter’s or combined renters’ annual income be 27.5 times the rent, or that the tenant or tenants have 50 times the rent in a savings account.

How to Find One and Alternatives

The search for your first apartment to rent in NYC can be a long one, and even if you do find that dream apartment, you’ll still need to prove that you can pay for it. For a lot of young people, especially students burdened with debt, meeting the strict criteria from landlords in NYC is not a straightforward affair. Most landlords want to see a high credit score or a salary that equals 40-45 times the monthly payment. Something which is beyond the means of many New Yorker’s, both newbies and natives alike. A co-signer usually steps in during these situations, but that presents another set of difficulties and won’t be a viable option for everyone.

What is a Co-signer?

A co-signer, or guarantor, is someone who co-signs your lease and agrees to pay the rent if you can’t. The typical requirements for a co-signer is a credit score of at least 700 or, if you don’t have that, an annual income of 90 times the monthly rent and, more often than not, residence in the tri-state area.

Most people first look to family to serve as guarantors, but if they don’t meet the criteria, this can be a serious roadblock. Fortunately, there are some ways around this.

Alternative 1: Offer extra cash up front

With some landlords, you can get around the requirements by offering more money upfront. Depending on how much security the landlord requires you may want to put up a year’s worth of rent. Other landlords may prefer a hefty security deposit rather than paying many months in advance. When it’s time to renew, and you’ve been a responsible tenant you may be able to negotiate a “burndown” on the deposit where you would get a month or two back.

Alternative 2: Hire a guarantor

This is a standard route for foreign buyers with no U.S credit history. A company like Insurent can do this for you.

More often than not the guarantor needs to be in-state which is what makes this option so useful. For U.S citizens with credit history, the rates are usually 75-80% of a month’s rent. International renters with no credit history, it can be 100-110%. For students with debt, you may pay more than 85%. However, if you have a steady job with a large company, you may pay less.

Alternative 3: Sublet or become a roomie

If you can’t meet the requirements or offer any extra cash upfront, you can always opt for a sublet. No one likes to stay in a place where their name is not on the lease but considering you can avoid the financial requirements this way it may be your only option. It’s straightforward to find sublets these days through sites like Lease break and Flip. You can also find a roomie through sites such as Symbi and Diggz.

Alternative 4: Build your credit

Even with these workarounds, it’s good to take time to improve your credit score so you can avoid this problem in the future. With better credit comes better interest rates and more secure financing the next time you need a loan.

Start by getting a secured credit card or installment plan. With a secured credit card, you will typically make a cash deposit to the credit card issuer to serve as collateral. Your credit limit is either equal to or a percentage of your deposit. Keep your credit card balance as low as possible, say, 30% or less.

Don’t close old accounts that are no longer in use as your credit history is essential in determining your credit score. When possible, pay more than the minimum monthly payment on the rent. Paying just the minimum amount each month can be a red flag to lenders and damage your credit score.