Occasionally, landlords will come across applicants who seem great on paper but do not quite meet the income or credit requirements. When this occurs, landlords have two options: deny them and lose an otherwise qualified applicant, or allow the applicant to have a cosigner. That said, not every rental owner is familiar with the practice of cosigners or how to protect themselves best. So, join us as we walk you through what it means to have a cosigner on a lease, their desired qualifications, and key responsibilities below.<\/span><\/p>\n Many landlords, including those who work with a <\/span>property management company in Philadelphia<\/b><\/a>, use lease cosigners as part of a broader tenant screening strategy for otherwise qualified applicants.<\/span><\/p>\n There are plenty of reasons why a prospective tenant looking to lease your rental may need a cosigner to seal the deal. These include insufficient income, lack of rental history, or limited or lower credit history. In these situations, having a co-signer provides landlords added peace of mind about approving the applicant. Let\u2019s dive a little deeper into these reasons to have a co-signer below.<\/span><\/p>\n Many landlords use rent-to-income guidelines, such as limiting rent to around 30% of an applicant\u2019s gross monthly income, as part of their screening process. Therefore, verifying that the tenant has a steady and sufficient source of income is necessary for landlords.<\/span><\/p>\n However, people starting a new job, graduating from college, relocating, or experiencing other major life changes may temporarily struggle to meet income requirements. If they satisfy your other screening criteria, allowing a qualified cosigner may be worth considering.\u00a0\u00a0<\/span><\/p>\n The key here is to have stringent cosigner requirements as well. This is not a matter of simply choosing anyone; the cosigner must have sufficient income for their own bills and the rent if the tenant cannot cover it.<\/span><\/p>\n Reviewing an applicant\u2019s rental history can provide useful information about whether they have met previous lease obligations. Landlords may verify relevant information such as payment history and compliance with prior lease terms, subject to applicable screening laws.<\/p>\n If an applicant has no previous rental history, landlords can consider other objective screening criteria, such as income and credit history, according to their established screening policy. This can give them a good insight into whether applicants can and will pay.<\/p>\n One great way to gauge a tenant\u2019s ability to pay rent on time is to perform a thorough credit check. A credit report shows a complete financial picture, including any late payments, outstanding judgments, bankruptcy, or large debts. Therefore, landlords must take note of the whole package and not just the numerical credit score when deciding between applicants.<\/span><\/p>\n However, it\u2019s important to note that a credit score provides one piece of an applicant\u2019s financial history<\/a>, but it should not be the only factor considered when making a leasing decision. A low or limited credit score can result from many circumstances, so landlords should evaluate applicants according to established, objective screening criteria. If an applicant does not meet the property\u2019s credit requirements but otherwise qualifies, allowing a cosigner may be an option, provided the policy is applied consistently to all applicants.<\/p>\n If a tenant fails to meet a financial obligation under the lease, a cosigner may be responsible for amounts covered by the cosigner agreement. The exact scope of that responsibility depends on the terms of the agreement and applicable state and local laws.<\/p>\n Just like the applicant themselves, a cosigner must meet certain screening criteria in order to qualify. That said, there are several things landlords can request of a cosigner before accepting them as a financial backer, including \u2013<\/span><\/p>\n For landlords, the key is to screen the cosigner according to established criteria, just as you would an applicant, to ensure they meet the financial qualifications necessary to fulfill their obligations under the agreement.<\/p>\n Becoming a cosigner is not something to take lightly. So, if you choose to allow a cosigner for your tenant, they must understand<\/span> the following responsibilities<\/span><\/a> \u2013<\/span><\/p>\n For all decisions landlords make, there are benefits and disadvantages to weigh. If you are on the fence about whether or not to establish policies to allow cosigners, consider the following \u2013<\/span><\/p>\n Allowing a cosigner can help you approve qualified applicants while protecting your rental income. Here are answers to some of the most common questions landlords ask about lease cosigners.<\/span><\/p>\n Although the terms are sometimes used interchangeably, a guarantor generally agrees to pay only if the tenant defaults, while a cosigner often shares financial responsibility under the lease from the beginning. The exact legal responsibilities depend on the lease agreement and state law.<\/span><\/p>\n In many cases, yes. If an applicant does not meet established screening criteria, a landlord may require a qualified cosigner, provided the policy complies with applicable laws and is applied consistently to applicants.<\/p>\n Absolutely. Landlords should verify the cosigner\u2019s income, credit history, employment, and financial stability just as they would for the tenant.<\/span><\/p>\n In many cases, yes. Depending on the lease agreement, a cosigner may be financially responsible for unpaid rent, damages beyond normal wear and tear, and other lease obligations if the tenant fails to meet them.<\/span><\/p>\n A cosigner may be appropriate for first-time renters, recent graduates, applicants with limited credit history, or individuals who have experienced temporary financial setbacks but otherwise meet your screening standards.<\/span><\/p>\n As a rental property owner, it is vital to approach your business objectively, and leasing a valuable rental property can be difficult when trying to <\/span>collect full rent every month. <\/span><\/a>Yet, employing a property management company, such as Bay Property Management Group, gives owners some much-needed peace of mind.<\/span><\/p>\nMain Takeaways<\/b><\/h2>\n
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What is a Cosigner?<\/b><\/h2>\n
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A cosigner is a third party who is financially accountable should the tenant be unable to pay the rent. While this person is liable for payment, they do not typically live in the rental property. For example, a parent may cosign for a student going off to college and renting their first apartment.<\/span><\/p>\nReasons Why a Tenant May Need a Cosigner<\/b><\/h2>\n
Insufficient Income<\/b><\/h3>\n
Lack of Sufficient Rental History<\/b><\/h3>\n
But what if your tenant has never leased before?<\/i><\/b><\/h4>\n
Limited or Lower Credit History<\/b><\/h3>\n
What Does It Mean to Have a Cosigner for Your Rental Property?<\/b><\/h2>\n
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The Requirements to Cosign for a Lease<\/b><\/h3>\n\n
What are the Responsibilities of the Cosigner Under a Lease?<\/b><\/h3>\n
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The Pros and Cons of Allowing Lease Cosigners<\/b><\/h2>\n
Benefits of Accepting Cosigners<\/b><\/h3>\n
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The Cons of Accepting a Lease Cosigner<\/b><\/h3>\n
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FAQs About Lease Cosigners<\/b><\/h2>\n
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What is the difference between a cosigner and a guarantor?<\/b><\/h3>\nCan a landlord require a cosigner?<\/b><\/h3>\n
Should landlords screen a cosigner?<\/b><\/h3>\n
Is a cosigner responsible for property damage?<\/b><\/h3>\n
When does it make sense to allow a cosigner?<\/b><\/h3>\n
Looking for Help Screening Rental Applicants?<\/b><\/h2>\n