The process of renting an apartment is no easy feat. From scouring the market to visiting potential places, getting documents in check, and communicating with your realtor or landlord — boy, is it difficult!
It’s a demanding journey, especially for first-time renters or those new to the rental game. Landlords seem to toss hurdles your way, whether due to a thin credit history, a past eviction, a modest income, or a myriad of other reasons.
What could help alleviate the hurdles? An extra level of security of payment. And who could provide such a safety net, you ask? Well, there are various options, but for today, let’s delve into the world of cosigners for rentals!
What is a Cosigner for an Apartment Rental?
An apartment cosigner is someone you sign your lease with, and in doing so, they get the right to your place. However, they also take on the responsibility to pay the rent if you can’t. This person could be a family member, roommate, or a financial services company like The Guarantors, Insurent, Jetty, or Rhino that offers cosigner services.
Cosigners share the same financial responsibility as you, the tenant. They can either live with you as a roommate or stay elsewhere. Because they’re officially on the lease, they have the right to live in your apartment and can even take over the lease entirely.
Cosigner’s Rights and Obligations
Entering into a rental agreement with a cosigner adds an extra layer of complexity, and it’s crucial to be well-informed about the rights and obligations involved. While we certainly hope you never find yourself in a situation where the landlord needs to reach out to your cosigner, it’s wise to be aware of their role.
Distinguishing Rights from Guarantors
Cosigners hold more rights to your place compared to guarantors. Although these terms are often used interchangeably, cosigners can legally exist as roommates, a privilege not extended to guarantors. To simplify, a family friend or relative securing your lease would typically be your co-signer. On the other hand, most financial services, while playing a similar role, function more as guarantors than cosigners. So, don’t worry about an office stranger suddenly becoming your roommate.
Cosigner’s Responsibilities
When the rent comes due, the obligation to pay lies with either the tenant, the cosigner, or both. Importantly, apartment cosigners remain tethered to the lease contract until its end, so be cautious with leases that automatically renew.
It’s essential to note that both cosigners and guarantors possess the right to take legal action for unpaid rent or damages to the property. And if rent defaults, they too take a hit on their credit score.
Why Would You Need a Cosigner to Rent an Apartment?
1. First Time Renter
If you’ve recently left your parent’s home and are stepping into the world of renting for the first time, landlords might see you as a bit of a risk. Without a rental history or references from previous landlords, snagging your initial apartment can be tough. Introducing a cosigner to the rental lease gives landlords the reassurance they need to rent to a newcomer.
The good news is, you’re only a first-time renter once! After this initial hurdle, you might not even need a cosigner.
2. Bad Credit History
Landlords typically prefer renters with a credit score of 670 or higher. If you’re just starting to build credit or, let’s say, not exactly a finance pro, having a cosigner can significantly boost your chances of getting approved.
When your co-signer has a solid credit score, it can overshadow any credit issues you might have. This assurance makes landlords more confident that they will get their rent, and it gives you a chance to focus on making timely payments to improve your credit score for the future.
3. Rent Exceeding 30% of Monthly Income
Quite a few folks turn to cosigners to apply for rentals they wouldn’t otherwise qualify for. Is it our top recommendation? Not really. However, there are instances when the rent goes beyond the recommended 30% of your income, even though you’re confident you can manage it. In such cases, a cosigner can come in handy to secure your approval. In some cities, such as New York, landlords typically look for your annual income exceeding 40 times the rent to qualify for their apartment. If you are a student, and not working full-time, you’ll most likely need a co-signer or guarantor.
4. Prior History
If you have a record of eviction, bankruptcy, or any minor offense, getting approved for a place without a cosigner becomes quite challenging. These past incidents can significantly impact your application, even if they have no bearing on your ability to pay rent. Having a cosigner can serve as a valuable assurance, nudging your landlord in the right direction to secure your lease.
Finding a Cosigner
The primary objective of securing a cosigner is to enhance your credibility when applying for a rental. Your cosigner should be able to attest to your character, but more importantly your finances. Friends or relatives make excellent cosigners, given their familiarity with your background.
It’s important to note that a cosigner undergoes the same level of scrutiny as you during the background check. In cities like New York, cosigners need to have a stellar credit score of 700 and an annual income of 80 times the monthly rent. Therefore, ensure that your chosen cosigner has a stable income, good credit score, and meets all the requirements outlined in the lease agreement.
Cosigning Services
On the flip side, relying on family members to cosign can be a hassle. You might prefer keeping certain aspects of your life private or avoiding well-intentioned comments on your journey toward independence. Or they might not even have a great credit score themselves.
In any case, should you encounter difficulties finding a family member or friend who aligns with the above criteria, there’s an alternative route — financial services. Consider reputable options like Insurent, The Guarantors, Leap, or Rhino, which can step in as reliable cosigners to strengthen your rental application.
- The Guarantors: They charge 35% to 85% of one month’s rent for a 12-month lease, with contract options extending to 24 months. Be mindful: cancellation fees are substantial at $300.
- Insurent: They charge a one-time upfront payment, ranging from 70% to 90% of one month’s rent for US citizens and 98% to 110% for non-US citizens.
- Rhino: Contracts are capped at 24 months and require the use of their security deposit insurance. Service fees are based on the applicant’s credit score and the security deposit amount.
- Leap: Leap offers the lowest rates at 4% to 8.5% of the annual rent as a single upfront payment. However, they don’t cover missed payments during the lease. Without rent coverage, missed payments are only collected from cosigners after the tenant’s eviction.
It’s important to note that property managers can still reject your application for rent even with cosigners. Most of these service fees are non-refundable. Plus, if you have a roommate, most services require both of you to be on the rent coverage plan. So before you sign onto one of these services, read the contract!
The Final Verdict on Cosigning: Yes or No?
Now that you know the basics of cosigners, the benefits they provide, plus their shortcomings, it’s time to determine whether cosigning is the right path for you.
Cosigners for apartment rentals prove invaluable if you’re a first-time renter, have a modest income, or simply seek that extra boost toward your dream place. Admittedly, there might be a subtle power dynamic — whether it’s relying on a family member or opting for a service with associated fees. However, considering the multitude of doors and opportunities that cosigners can open for you, it’s a relatively short-term negotiation.
Before diving headlong into the cosigning process, take a moment to carefully weigh the pros and cons. Remember, this isn’t a permanent solution; it’s a temporary arrangement with its own set of considerations. So, whether you’re saying yes or no to cosigning, make sure it aligns with your immediate needs and long-term goals.