So, you've found your dream apartment complex, and now it's time to submit your rental application and sign the lease. But, your poor credit history doesn't qualify you to sign the dotted line alone, or maybe you don't make enough money.
It can get overwhelming between trying to manage money, utility bills and improving your credit. Depending on your circumstances, you might need someone else to co-sign your lease to qualify for the apartment.
Here's everything you need to know about having one.
A co-signer is a third-party, usually a family member or friend, who co-signs the lease with you. This person is in a better financial position than you, has a robust credit history and a good credit score.
This third party has a legal obligation to pay if you default on your monthly rent. They don't have to live in the apartment, but their name will be on the lease.
It's insurance for your potential landlord if your credit check shows a low credit score or an eviction history. This is different than a guarantor, someone that just puts up a promise to keep paying the rent if you fail to.
Co-signing an apartment means that you, as the tenant, need a second person or third party to sign with you to get the apartment. This is necessary because your current financial status is insufficient for the property manager to OK your application.
Whether this is your significant other, a roommate or a family member, you must enter this relationship transparently. This person is fully responsible for your debt if something goes wrong, which increases their financial burden.
You may hear these terms interchangeably, but there are some fundamental differences. Think of co-signing as just another person who has access to the apartment and is held responsible for the rent. Every month, both the co-signer and the tenant are equally accountable for the money as they are both on the lease.
A guarantor, however, does not have access to the apartment and is really just a "guarantee" that the landlord will get their money. Guarantors are responsible for the rent money only after the tenant defaulted on the rental property payments. A guarantor is there to alleviate the financial burden when you fall short.
The guarantor can take you to court for not paying your rent, as well.
Many landlords have had bad experiences with other renters and just want a tenant that will stay up-to-date on payments for the entire lease term.
Sometimes, landlords might require a co-signing to lease the apartment to you. This is usually the case if you have low income, poor or no rental history or low credit scores.
A co-signer means they can still get the rent if something happens that would make it difficult or impossible for you to pay the rent. Both you and the co-signer are equally responsible for the unpaid rent.
When agreeing to a third-party signing your apartment lease with you, you should confirm that you can pay without issue.
Before starting with your search, sit and go over your budget. You should not pay more than 30 percent of your income on rent, if possible.
The answer is no. Co-signing your apartment has no impact on your credit report. As long as you make your rent payments in full every month, you're good.
Absolutely. If the rental property accepts co-signers, it will be much easier for you to move in. Not guaranteed, but definitely much easier.
This is particularly applicable for first-time renters (think college students), people on a credit-building journey, people with low credit scores or an eviction that was outside their control.
The first people to approach are a parent, family members or close friends, who would be willing to do it.
It's vital that they trust you, but you also trust them. They will have the same legal right as you to the apartment — they can live in it whenever they want, take over the lease and have access to your things.
Check that they can take on the financial burden. They should share their credit report with you and talk honestly about being financially responsible. If you both fail to pay, the landlord will include you in a lawsuit suing for the rent, plus it will affect your credit.
How would this change your relationship with your co-signer if you couldn't pay the rent? Even if you wouldn't take advantage of the person and force them to pay your rent, things could still go wrong.
Discuss every scenario you can think of with your potential co-signer to ensure this won't destroy your relationship. Signing a legal agreement to take on someone else's significant amount of debt isn't a simple favor.
Now that you found someone to offer support and help you pay your rent, what do they need to complete the process?
The property manager will require the co-signer to submit a paid rental application, a background check, proof of income and a report from at least one of the credit bureaus for a credit check.
Proof of income will include at least two documents to verify that the co-signer's income covers their own housing and the tenant's. They will confirm the co-signer paid all previous bills, there are no past evictions or issues with their credit.
So, you've gone through everyone you know and no one can or will co-sign for you. You're not entirely out of luck yet.
You can still make a case for yourself with the property manager. Try explaining why you have this issue in your credit score and what you're doing to fix it. If you try this, it's important to show proof, like recent payment streaks on your credit report.
If that doesn't work, speak the language of money. Offer to pay more rent upfront or a larger security deposit. Or, choose a cheaper unit in the building, so your credit becomes less of an issue.
Be careful before signing anything if you're considering a co-signer service. The service can act as a co-signer, but adds on a hefty fee to your monthly rent. The process of getting the apartment is similar, the service will provide you with a certificate to present to the landlord.
However, by using a service, you'll also pay a fee on top of your rent payments. Some services charge a one-time percentage of your rent, around 10 percent. While others charge a monthly fee that can equal up to 110 percent of rent payment.
It's important to understand that a co-signer option is not a slam dunk when it comes to qualifying for an apartment. Bad credit scores and spotty payment history can all negatively affect your chances of renting that dream apartment.
You can find a building owned and managed by an individual landlord or smaller local company — they're more likely to have less rigid standards for renting and be more open. But, make sure to read reviews to confirm that the property is legit and there's no red flag.
It's essential to go over your current financial obligations before committing to a co-signer.