How does a Guarantor Application Work in NYC?
What is a Guarantor?
A guarantor is a person or a company who will co-sign on your lease in case you do not qualify to rent an apartment in New York on your own. When they sign the lease, they are assuring the landlord that there will be sufficient funds to cover your rent for the duration of your lease.
In a nutshell, you need a guarantor to promise that there will be no problems with rent payment.
While the guarantor co-signs your lease, this does not necessarily mean that they are a co-signer. Co-signers are essentially another tenant in the unit, which means that they can occupy the apartment. Legally, guarantors are not allowed to inhabit the apartment. Furthermore, guarantors only become liable for any debts on the apartment after all other means of collection are exhausted.
How Does One Qualify to Be Your Guarantor?
In order to qualify, your guarantor must have two things.
First, they should have an excellent credit score. This means that their credit score should be 750 or higher.
Second, they must make 80 times the monthly rent annually. This means that if you are applying for an apartment that costs $2000 in rent per month, your guarantor must earn at least $160,000 per year.
However, some landlords can require guarantors that earn more than 80x annually, depending on various factors such as the terms of the lease, the amount of monthly rent, and your financial status. In fact, if the apartment is in high demand, many landlords can be more demanding with their guarantor requirements.
Can Anyone Be Your Guarantor?
Generally, anyone who is willing to meet the financial and legal obligations can be your guarantor. Due to the sensitive nature of the agreement, most guarantors end up being family or close friends.
If you have a close personal relationship with your employer, colleagues, or friends, they can also act as a guarantor on your behalf.
It is common practice for landlords to require guarantors to be located in the same city or state so that it is easier to contact the guarantor if any issues arise. However, if you have a guarantor that is living out of state but has a strong credit history, long-term employment, and stable income, that could be acceptable as well. Take note that landlords will be unlikely to accept guarantors who reside outside of the U.S.
There are cases when your family and friends might not be willing to act as your guarantor, or they do not meet the requirements, such as having a poor credit score. This is when you should consider hiring a guarantor service. There are third-party guarantor services that will take on the responsibility of being your guarantor, such as banks or private companies.
While third-party guarantors do charge fees for their services, you might find it easier to qualify for an apartment if you avail of such.
What Does the Guarantor Need to Provide?
If you are working with a private entity as your guarantor, they will need to submit the following documents:
- Signed guarantor application form
- Copy of government-issued ID
- Copies of their two most recent tax returns
- Copies of their two most recent pay stubs
- Copies of their two most recent bank statements
Aside from these forms, guarantors will also need to pay the application fee. Depending on the landlord or brokerage company handling the transaction, this can range anywhere from $25 to $200.
Does the Guarantor Need to be on the Lease?
Yes, the guarantor will need to be on the lease. Since they are liable for your stay as a tenant, they will be required to sign the lease. Your lease will not be considered a legally binding document until your guarantor signs on.
Again, a guarantor is not considered a co-signer even though their name will be on the lease.
Are There Other Situations Where You Would Need One?
Yes, there are other situations where landlords might require a guarantor, even if you have a stable income and good credit history.
One such case is if your credit history is too short or if there are multiple income fluctuations in your employment history. At times, you may even be asked to find a guarantor if you fall just shy of the qualifications. Even if you can prove that you earn more than enough to cover each month's rent, these cases can cause your landlord to become uncomfortable.
If you are a foreign national, landlords may also require a guarantor who is living in the country as a way to ensure that your rent will be paid diligently.
What Happens to the Guarantor if You Fail to Pay Rent?
If you fail to pay rent on time, the landlord can contact the guarantor to seek payment. Any late fees will most likely be charged to them as well. What’s more, failure to pay rent will result in negative credit scores for you and your guarantor.
In the worst-case scenario, your landlord can sue both you and your guarantor. They can hire a collection agency to get any rent that has not been paid. You can also get evicted from the apartment.
Can a Guarantor Cover the Security Deposit?
If you don't have enough money for the security deposit, you can ask your guarantor if they are willing to pay. However, it will be up to them whether they agree. Keep in mind that asking your guarantor to cover these fees may send a signal that you aren't earning enough money to cover the monthly rent. This can be a red flag to many landlords.
Can You Use More Than One Guarantor?
Legally, one guarantor should be able to cover the rent of the entire unit. However, if you are living with roommates, some landlords may accept multiple guarantors to cover each tenant. This arrangement is common for students who are renting an apartment. Each person may have a different guarantor since they are not related.
Finding a guarantor can be a challenge as it is a huge financial and legal commitment. It involves hefty fees and quite a bit of paperwork, not to mention a huge amount of trust between you and your potential guarantor.
Done right, having a guarantor is a good way to qualify for an apartment even if you have poor credit or unstable income. You'll be given a chance to build your credit score assuming that you pay your rent on time.
Always remember that any failure to pay rent in a timely manner can cause massive financial repercussions for your guarantor, so always take this role seriously. Keep in mind that anyone who takes on the role of your guarantor has also taken a huge leap of faith in you!
If you want to avoid using a guarantor altogether, try looking for no-fee apartments.