Demonstrating financial responsibility is often a key factor in securing a rental property. Many renters, such as students, newcomers, or individuals who are establishing their credit, will find it difficult to do so.
A guarantor can help provide a landlord with the confidence they need by assuring them of an individual’s ability to pay rent on time.
The purpose of this article is to describe what a guarantor is, how to select the right guarantor for you, and ways in which you can strengthen your own rental application independently.
Who Should I Put as My Guarantor? Making the Right Choice
A guarantor is a financial backer who signs your lease and agrees to pay rent if you cannot. Choosing a reliable apartment guarantor can improve your chances of getting approved for a rental.
Landlords use guarantors as an alternative option for tenants with less than standard income, credit history, or rental background qualifications to mitigate risk.
1. A Parent or Legal Guardian
Parents are the most common choice because of established trust and typically stable finances. They will often support a child’s independence but ensure they understand the legal commitment and meet the landlord’s income requirements.
2. Another Relative, Like a Sibling or Aunt
An older sibling, aunt, or uncle with solid financial standing can be an excellent option. They often combine familial trust with the necessary financial credentials. If a parent is unable to qualify, a sibling, aunt, etc., could be a suitable option.
3. A Close Family Friend with Strong Finances
A long-standing family friend who understands your personal circumstances and has sufficient financial resources may agree to serve as a co-signer. It is important for this relationship to be robust enough to survive the application process and any future legal consequences that could arise from the co-signer obligation.
4. A Professional Mentor or Trusted Colleague
In rare instances, a business mentor or trusted colleague may also provide co-signing services. This is dependent upon the level of professional respect in the relationship and their willingness to accept the responsibility associated with being financially responsible for the loan.
It’s important to choose a reliable rental property manager in Baltimore to advise whom to place as a guarantor on a rental application. You need them to be able to fulfill their promise when necessary, without ruining your friendship or exploiting you.
Apartment Guarantor Basics: What They Are and Why You Might Need One
Image Alt Text: Property manager and guarantor shaking hands
The person signing an apartment guarantor document agrees that they will be responsible for paying your rent or covering any damage to the unit if you do not comply with your responsibilities as described in your lease.
A Guarantor Provides Financial Security
Having a guarantor provides the landlord with a financial back-up against potential losses from having a new renter, someone with limited income, or someone trying to build their credit history.
While you still have to strategically manage your finances and even cut moving costs when transitioning to your new place, a guarantor can still be useful. They reduce the landlord’s exposure and increase the likelihood of approving a new renter.
Landlords Require Them to Mitigate Risk
Property Managers will generally ask for a guarantor if the applicant does not meet the standard property manager requirements. The most common reasons are a credit score that is below a specified level, income that is insufficient to pay the rent (less than three times the monthly rent), or no substantial rental history.
They Must Meet Specific Financial Criteria
Typically, the guarantor’s financial situation must be better than the applicant’s. Generally, landlords want some evidence of steady income; the amount varies, but it is usually 80-100 times the monthly rent per year, as well as a good to excellent credit history. In the event of default, the landlord knows that the guarantor has sufficient resources to provide payment.
The Role Carries a Binding Legal Responsibility
By signing the Guarantor Agreement, that person has entered into a legal obligation. The landlord is able to take action against the guarantor for unpaid rent, fees, and/or damages if the tenant breaches their obligations under the lease (as defined by the document).
It Is Different from Being a Co-Signer
A Co-Signor will be as liable as you are for the entire duration of your rental agreement and may also have occupancy rights in addition to their liability. Your obligation as a Guarantor is typically secondary to the tenant’s obligations under the rental agreement, and you will only become liable if the tenant breaches the terms of the rental agreement. As a Guarantor, you do not have any occupancy rights in the rental unit.
Preparing a Strong Rental Application Without a Perfect Credit Score
Having an excellent rental application can compel even the most strict landlords to focus on your overall reliability rather than your credit score. To do this, you need proper documentation and proactive preparation to compensate for your lapses in your financial history.
1. Provide Context for Your Credit History
Provide a short factual explanation of the specifics of your credit problems (e.g., a single instance of a medical bill, or a large amount of student loan debt). Do not use emotional language when explaining your financial issues.
Being directly transparent about specific credit problems, it may help the landlord understand your application more fully and be more willing to consider all of your applications.
2. Demonstrate Exceptional Income Stability
Provide proof of steady, reasonable income, such as recent pay stubs, a letter confirming you are employed, and a few months of bank statements. It shows that your steady income far outweighs any negative issues on your credit history.
3. Secure Strong Verbal References
Gather the contact information for your previous landlords and/or employer so they can speak positively of your ability to meet obligations and take good care of their rental properties. The recommendation of a landlord or employer regarding your timely payment and overall care of a rental unit will help weigh against the negative credit reporting issue.
4. Offer to Pay a Larger Security Deposit
Where allowed by state or local regulations, paying a higher security deposit than what is required can help protect a landlord from the potential loss of rent that could occur if you were to leave early.
The greater financial obligation will also demonstrate that you are serious about renting and provide the landlord with additional financial protection, which may make them more willing to approve your rental application.
5. Present a Complete, Organized Application Package
When submitting all required documents, be sure they are organized, neat, and submitted in a timely manner. By being completely prepared and organized (i.e., having all required documentation such as ID’s, proof of income, reference letters, and information regarding any negative credit issues), you are showing yourself to be a responsible, competent, and reliable tenant before any background check or screening process.
Conclusion
Getting that rental is about showing a landlord that you are financially responsible. By either utilizing a qualified guarantor in your application or by adding documents and references to your application, you will be able to show a landlord that you have taken proactive steps toward building their trust.
The knowledge of what landlords require of you as an applicant enables you to develop a strategic plan for navigating rental approvals, which creates a higher degree of assurance when moving into your next home.
