Most of us can agree that finding a New York City apartment is tough. However, getting approved for an apartment may be even tougher, and this is where lease guarantors come into play. Typically, NYC landlords want applicants that have a high income, a strong credit score, and excellent rental history. But what are your options if you don't meet the typical NYC apartment application requirements? Are you totally shut out of the NYC rental market? Will you be forced to live with your family forever? Not exactly, as this is where guarantors come in.
A lease guarantor is essentially a cosigner for your apartment. Specifically, the guarantor guarantees that the lease payments will be made to the landlord if, for some reason, the tenant does not pay the rent. In the unfortunate event that you are evicted, this will affect the guarantor’s credit as well yours.
Not exactly. It’s important to note that a guarantor does not have the right to possess or occupy the apartment (unless you and anyone else on the lease, such as your roommate(s) agree). This is essentially the main difference between a lease guarantor and cosigner as a cosigner is essentially treated as another tenant, with permission to occupy the apartment. Practically, this means that many folks use the terms guarantor and cosigner interchangeably, especially when a family member (typically a parent) is guaranteeing a lease, but in truth, guarantors generally need to meet stricter income requirements to be able to help you secure a lease.
If you know that you have a low credit score (below 650) or are unemployed or simply don’t make enough money or have a recent bankruptcy, etc., nine times out of ten, you will need a guarantor to be approved for an apartment in New York City. However, if for some reason you are unsure about whether you qualify, or you fall on the cusp of the landlord’s requirement, the best way is to review the landlord’s conditions and talk to your broker. Most brokers are knowledgeable about each landlord’s requirements and can tell you whether it's best to submit your application with a guarantor. In a fast-paced rental market like New York City, you should always be prepared to provide additional information with your application to avoid missing out on a great apartment.
So you’ve been told that you’re going to need a guarantor, the big question now is, who should you ask to be your guarantor? Asking someone to co-sign for your apartment and be your guarantor is never easy. However, to make things easier, you should aim to ask someone who you feel comfortable with and, most importantly, someone who trusts you. Additionally, you should ensure that the guarantor makes a significant amount of money so that he or she can financially cover their own living expenses, together with your apartment rent. Typically, your guarantor will have a lot of questions, including what information do they need to provide and who will be occupying the apartment with you. With that being said, It actually may be easier to find a guarantor if you plan on residing in the apartment alone. That is because, oftentimes, your prospective guarantor may trust you but have reservations about your roommates.
In the event you find a guarantor who is uncomfortable co-signing for you and your roommates, it’s crucial to know whether or not the landlord accepts multiple guarantors. If the landlord accepts multiple guarantors, you can agree with your roommates that everyone will be responsible for obtaining their own guarantor.
Pro tip: if your landlord accepts multiple guarantors, the guarantors, together with the roommates, should have a written agreement about the procedure in the unfortunate event that one roommate doesn’t pay the rent. This is another way for your guarantors to feel comfortable about signing as a cosigner for the apartment.
In New York City, the guarantor should live in the city or the surrounding areas. (This includes Connecticut, New Jersey, etc.). However, some landlords may approve a guarantor who lives in other states. Essentially, it is important that the guarantor can sign the original copy of the lease if the applicants are approved. While the other requirements vary amongst landlords, typically, most landlords want the guarantor to demonstrate the following:
- A high credit score. Usually, landlords require that the guarantor’s credit score be exceptional, probably over 700, with no recent defaults, bankruptcies, or collection accounts.
- Meet income requirements. The guarantor must be able to demonstrate that they can pay for the apartment, in the unfortunate event that the tenants do not pay. In New York City, the standard income requirement is that the guarantor’s salary is at least 80 - 100 times the rent. For example, if the rent is $2,000, most landlords will require that the guarantors have a combined income somewhere between $160,000 to $200,000.
The guarantor should be prepared to submit the same documents as the applicants; 2-4 recent pay stubs, two months of most recent bank statements, two years worth of tax returns, and a letter of employment. If any of the guarantors are self-employed or own a business, a certified public accountant may provide a statement regarding their income.
Pro tip: Finding a guarantor who is a salaried employee versus a guarantor who is self-employed makes verification and the application process easier. If the guarantor is self-employed, a certified public accountant typically must provide a letter/statement, attesting to the guarantor’s yearly income. Additionally, the landlord typically wants to see that the guarantor has been self-employed for at least five years (sometimes 10+ years).
Many students and NYC transplants, like international workers/students, may have to use what is called an institutional guarantor because they can’t find a traditional guarantor. Institutional guarantors are companies, financial institutions, and/or corporate entities that will act as a guarantor to your lease for a fee. An institutional guarantor will have more lenient criteria to act as your guarantor but will charge a fee in return.
Specifically, Insurent requires that the applicant make at least 27.5 times the monthly rent. Typically, the applicant should have a credit score of at least 630. Their fees are as follows:
- For U.S. Citizens: 60-90 percent of one month’s rent.
- For non-U.S. Citizens: 95-110 percent of one month’s rent
The Guarantors requires a credit score of at least 630, but their website mentions that they will consider other factors in reviewing your application. Additionally, The Guarantors requires that you earn 27 times the monthly rent annually. Their fees are as follows:
- For U.S. citizens: the cost ranges from 4.75 to 7.5 % of the annual rent
- For non-U.S. citizens: 7-10 percent of annual rent
Pro tip: neither Insurent or The Guarantors requires a U.S. credit history, although the approval process may vary. If you don’t meet these exact guidelines, these agencies still may be able to approve you on a case-by-case basis.
It used to be that applicants could pay multiple months of rent upfront or pay an extra security deposit to get approved for an apartment. However, with the recent enactment of New York’s Housing Stability and Tenant Protection Act of 2019 (“HSTPA”), this is no longer the case. Specifically, the HSTPA limits all security deposits in New York State to just one month’s rent. Additionally, the HSTPA prohibits landlords from collecting future rents in advance, which was a common practice of NYC landlords renting to students, or people with bad credit. As such, applicants will probably now be more dependant upon institutional guarantors if they can’t locate a guarantor on their own.
The key to a successful apartment search is to be prepared. That means having your paperwork in order and doing your homework prior to looking for an apartment. If you think you'll need a lease guarantor, try to find one as soon as possible.
If you're unsure if you'll qualify for an apartment you can start calculating how much rent you can afford based on your income. Then you can check your credit score, which you can do for free on places like credit karma, annualcreditreport.com, or credit sesame. Additionally, a lot of credit card companies offer your credit score as a perk to being a cardholder.
The next step will be gathering your paperwork, which you'll need to submit even if you use a guarantor. Typically you'll need your most recent (2) paystubs, an employment verification letter (or at least know how to get one fast). You should also locate your last year’s tax returns and have the contact information for each of your past landlords.
Pro Tip: Submitting proof of large saving accounts or other assets can improve an applicant’s chances of getting approved by the landlord.