What is a Lease Guarantor and When Do You Need One in NYC?

The PropertyClub Team
Jan 9th 2020
Qualifying for an apartment lease can be tough, especially in NYC where the monthly rent and qualifying requirements can be extremely high. So what's a guarantor and how do you get one? What about a cosigner? Read our comprehensive guide to get the full rundown.

Most of us can agree that finding a New York City apartment is tough. However, getting approved for an apartment may be even tougher. This is because many NYC landlords have strict criteria when renting their apartments in the competitive NYC rental market. Specifically, landlords want applicants who can provide the following:

  1. A strong rental history. That just means that the tenant hasn’t been evicted recently, and has paid their rent on time in the past. This also means that the applicant was a good neighbor. It’s also a plus if you have a history of carrying similar monthly payments in the past. For example, if your most recent apartment was only costing you $1,500 per month and you’re now applying for a $3,000 per month apartment, landlords will likely be stricter when it comes to their income requirements.
  2. A solid credit score. Typically landlords require the applicants’ credit score to be over 650 with no recent defaults, bankruptcies, or collection accounts.
  3. Meet income requirements. The applicants must be able to demonstrate that they can pay for the apartment. In New York City, the standard income requirement is that the applicant’s salary is at least 40 - 50 times the rent. Many people refer to this as the 40x rent rule, but there’s no such formal rule, just a guideline of needing at least 40x the monthly rent in annual income to be able to sign a lease with most NYC landlords. For example, if the rent is $2,000, most landlords will require that the applicants have a combined income somewhere between $80,000 to $100,000. The reality is, the foregoing requirements tend to impact NYC transplants, recent grads, and lower-income families the most.

You can also check out our comprehensive NYC apartment application guide for more details. 

What is a guarantor? 

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.

Is a guarantor the same as a cosigner?

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. 

Be prepared when apartment searching

The key to a successful apartment search is to have your paperwork together and do your homework prior to looking for an apartment. For starters, you should ensure that you know your credit score. You can check your credit for free on places like credit karma or annualcreditreport.com or credit sesame. Additionally, a lot of credit card companies offer your credit score as a perk to being a cardholder. 

Next, you should have 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 and.or other assets can improve the applicant’s chances of getting approved by the landlord. 

What if you don’t meet the requirements to rent an apartment in New York City?

So what happens if you don’t have a strong rental history, or you don’t make 40-50 times the rent? 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.

How do you know that you need a lease guarantor?

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 its 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. 

Who should you ask to be your guarantor?

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

What are the typical requirements for a guarantor?

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:

  1. 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. 
  2. 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). 

What about paying extra money to get approved for an apartment?

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

What is an institutional guarantor in NYC?

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. 

For example, companies like Insurent Lease Guaranty and the Guarantors are well-known companies that can act as institutional guarantors for your NYC apartment. 

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.