Signing an apartment as a first-time renter is a tedious task, especially in America. You cannot fulfil every requirement, especially the ideal income threshold. However, a guarantor can help you with the maximum functions and make the owner vouch for you as a viable tenant.
You must be wondering what a guarantor is and who is eligible to be one for you? Don’t think much; we will cover all the essential points of a lease guarantor so that you can plan to purchase your favourite housing property without much ado.
What is a guarantor for an apartment?
Guarantor meaning in real estate is a person who acts as a cosigner for your apartment. It means that they are taking the responsibility to pay the rent if you fail to do so. Nevertheless, guarantors can be anyone willing to oblige financially and act as a sponsor.
The best part is even your parents, colleagues, and friends can be a guarantor for your apartment. If you fail to convince any of them, you can always go for third-party lease guarantor companies at a fee to fulfil your requirements.
Are guarantor and a cosigner the same thing?
As much as you search online about the two, you will understand that these are not the same terms. While the task of an apartment cosigner guarantor is the same, there is a slight difference between the two. Unlike a guarantor lease who doesn’t live with you, a cosigner is your co-tenant.
However, a lease guarantee is an agreement someone else ‘cosigns’ to pay for the rent on your behalf if you fail to do so. So, both of these terms are slightly different, but you should always have the critical information handy.
What is the need for a rental guarantor for the apartment?
New buyers have the highest need for a lease guarantee, and the most common reason is low budget or income. Budget is a big issue, especially in cities like New York, where the average price of a monthly rental is approx. $3000. Income scale and bank balance are the top-most requirements for a landlord.
Therefore, having a financially sound guarantor means you can opt for a larger property because the lender will check their account balance in this case. A rent guarantor agreement is a security for the tenant and the borrower.
Most lenders require a 20-30% down payment, but opting for a guarantor can help you lease a more extensive property with a 100% cash deposit.
What are the key points of agreement for a guarantor on lease?
Adding a guarantor for apartment is simple and a matter of mere paperwork, but before that, an apartment lease guarantor must fulfil the income requirement of the buyer, which means that his income should be at least 80 times the monthly rent of the apartment.
A rental guarantor agreement is signed to include a guarantor in your contract as a tenant. There are some vital guarantor information documents that they have to submit –
- Contact information
- Mailing address
- Bank statement
- Tax returns
- Pay stubs and social security number
According to the agreement, the guarantor on the lease is responsible for paying for any damage exceeding the security deposit. Some landlords also check if a guarantor is located in the same city as the tenant. The obligations, however, strictly vary from landlord to landlord.
Who can qualify as a guarantor for an apartment?
A lease guaranty is an agreement cosigned by any person willing to pay the rent on your behalf in case of problems. It is better if the guarantor is a close friend or a family member. Business associates or your company can also act as rental guarantors.
If you’re uncomfortable taking help from them, lease guarantor companies are the safest option. In addition, these guarantors are an ideal option for tenants with a good credit score because this process will require at least 80% of the total monthly rent as an insurance cost.
Apart from that, lease guarantor applicants should be between 18-65 years of age to qualify as a cosigner. However, please note that not every relative is eligible to be your guarantor. For example, the mortgage owner sometimes restricts your uncle and aunt or cousins, and the latter is allowed if they raise the tenant.
How long can someone be your guarantor?
The owner sets the duration of the agreement of a lease guarantor in the beginning. Therefore, the necessity of a lease guarantee will cut down when the tenant’s credit score increases or his income increases.
You will no longer require a guarantor if you have built around 20% of the equity of your property. Nonetheless, once your income increases, you will be eligible to opt for more competitive rates without a lease guarantee.
What are the alternatives if your relatives disagree to cosign for the property?
There are cases when no close relatives, including parents, feel uncomfortable acting as a guarantor for you or are disqualified as a cosigner. In that case, you can opt for the following alternatives-
- Rent the apartment with your friend as a co-tenant. It will prove to be a less hectic task for first-time buyers.
- Opt for lease guarantor companies as they require a good credit score irrespective of your annual income. Their insurent cost is about 70-80% of the total monthly rent of the property.
- Keeping aside the income criteria, some landlords also agree with another property as a security, so your parents can help you in this case.
Can there be multiple guarantors for an apartment?
Yes, it is effortless to get more than one guarantor for your lease in cities like NYC – you have to ask the landlord. For example, the rent is $2,500 for the apartment, so the guarantor’s income has to be around $200,000 to meet the requirements, which is pretty expensive to maintain.
However, the hefty load will decrease with more than one rent guarantor like any of your parents. After that, you’ll have to show your bank statements, and you’re good to go!
