For first-time renters or those looking to rent without proof of stable employment and income, landing that dream apartment may take an extra effort. When you’re credible but not quite meeting all the marks, a landlord may recommend you find a guarantor, allowing you to meet their requirements in a combined group effort. If you’re looking for a guarantor but are unsure of how to find one, keep reading.
What is a guarantor, and what do they do?
A guarantor legally guarantees a renter payment. They sign the lease with the tenant and reassure the property manager or landlord that they’ll fulfill your financial obligations if you, the occupant, default on payment. A guarantor promises legal responsibility for paying as arranged by the lease, but only if the tenant fails to meet those financial demands. A guarantor is not necessary, but in some situations, applicants may rely on them for approval.
A landlord will prefer a guarantor who lives nearby with a sufficient income to cover payments if you default. When dealing with a mortgage instead, the guarantor is a part of the mortgage process and will have to disclose their debts, assets, income and go through a credit check. A mortgage company will want a guarantor that can pay for their rent or mortgage and assume yours in case of default.
You also have the option to have someone act as a cosigner or joint applicant. The main difference between a guarantor and a cosigner is that the lender must exhaust every collection possibility against you before they can sue a guarantor. Cosigners have less protection, and landlords may have the legal authority to sue immediately. Joint applicants will have the same rights and liabilities concerning the property, and both parties are responsible for the entire debt.
When can guarantors help?
A guarantor will be helpful if you have any evictions in your rental history, an unreliable unemployment history, a poor credit score, previous bankruptcies, or no credit history. Landlords are typically looking for someone whose income is at least three times the rent and utilities, so if you don’t meet that standard, a guarantor can help.
Ask your potential landlord if they need a guarantor checklist, and use it to determine any guarantor requirements. Take time to consider what assets and what credit rating your guarantor needs to qualify. For example, if you need someone to ensure your apartment in Austin, the owner may prefer your guarantor be nearby enough to attend signings or meetings to discuss terms.
For mortgages, your guarantor will most likely need to prepare to meet for official dates with you and the lender. This entity will then list the guarantor as a joint owner of the property until the end of the mortgage.
How to find a guarantor
Regardless of personal relations, finding a guarantor is a business deal. Meet with your potential guarantor and have as much information as possible, including the contract, payment terms, guarantor requirements, your contingency plan, and a transparent, concise reason why you deserve help. If family or friends can’t be available to assist as cosigners, consider a commercial guarantor. Insurance lenders will sign on as guarantors for a one-time fee.