The Nest

NestApple's Real Estate Blog

Featuring real estate articles and information to help real estate buyers and sellers. The Nest features writings from Georges Benoliel and other real estate professionals. Georges is the Co-Founder of NestApple and has been working as an active real estate investor for over a decade.

2021 NYC Apartment Guarantor Guide

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In the New York City real estate world, guarantors are quickly becoming the norm. Most transplants to the Big Apple first learn about them when theyAre Guarantors Allowed Outside Of NYC? realize they don’t have the income requirements ready for an apartment in the area. Third-party guarantors were originally a UK-based concept, where companies or professionals would guarantee that you could make rent payments for an additional fee. Nowadays, many NYC apartments accept them.

With the price of rent taking more out of peoples’ paychecks than ever before, guarantors are becoming a major staple in the New York City area. It’s clear that they now have a major place in the real estate scene in NYC and that it’s going to be a staple in this particular area. But, are guarantors allowed to be used outside of NYC?

What Are Guarantors in NYC?

Guarantors are people or companies that are willing to act as a “financial backup” for a person who wants to rent an apartment. For a fee, these individuals will offer up paying rent money if you are unable to make ends meet or act as a “proxy deposit.” When you have one, you basically have someone backing you up as a responsible renter.

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 a 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) isneed help guaranteeing a lease. Still, in truth, guarantors generally need to meet stricter income requirements to help you sign a lease. 

What May Make You Require A Guarantor?

There are a lot of different reasons why you may need one. These include:

  • Poor Credit history. A score below 600 may make it hard to rent.
  • Low Deposit. If you can’t make the initial deposit, you might be asked for a guarantor.
  • Bad Finances. Some apartments will require you to have a certain amount of cash in your bank account or similar. A guarantor will get you around that loophole.
  • Non-Residency. People who aren’t US citizens or local to NYC may need one by default.

Who Can Be A Guarantor?

In most cases, a guarantor is someone who can afford your apartment and has a great credit report. He or she has enough liquid assets to cover the costs of at least one to three months of rent, along with extra for any additional rent. This means that anyone, including a friend or family member, can technically be a guarantor. That person needs to show tax returns or pay stubs.

In some cases, they may also be asked to pony up a little extra for the deposit. However, this is far from the norm. It’s best to think of a guarantor as a cosigner on a lease agreement. To be one, you will need to have a good credit score above 700 and an annual income that’s 80 times the monthly rent of the entire apartment.

What Are Professional Guarantor Companies?

Professional guarantor companies are groups that act as guarantors for renters. These companies are almost exclusively found in New York City and provide a very important service. People who move to NYC don’t always have a friend who can act as a guarantor. Since some folks won’t have NYC-local buds, these companies are there to help them out.

Currently, there are three main guarantor companies in New York City. They are:

How Much Do They Charge?

This tends to be a percentage of the rent rather than a flat fee. The fees and rent percentages also vary depending on the apartment’s price, with high-what does a guarantor meanend apartments often costing extra. To find out how much you will need to pay, you may have to give each guarantor a call.

Can You Use Guarantors Outside Of New York City?

While New York City is the most common city for people to use guarantors, it’s not the only one by far. Currently, there are no laws that bar you from using a rental guarantor insurance company in any of the tri-state areas. However, that doesn’t mean it’s very common nor does this mean that apartments will allow for it. Here’s what people need to know about using one outside of the city:

  • You will need to ask your apartment landlord first. Most landlords are amenable to it as long as they are legal and capable of handling the risk. Not all landlords will be okay with it, though!
  • Then, you have to ask what type of guarantors that you want to get. Some will allow friends, others will require you to go to a professional company.
  • Finally, the hardest part of finding a company is to find one that works in your area. However, each company has a range of places that they service.

Note: State laws in the tri-state area are currently fine with the use of guarantors. However, that doesn’t mean that local laws are okay with it. Cities have the right to ban guarantor insurance use if they so choose. While we have not heard of any cities doing this, it’s still something you should be aware of. 

Can You Use Multiple Guarantors Per Lease?

On paper, the answer is yes. Most landlords are fine with having multiple people act as guarantors on a lease as long as their total incomes will be 80 times the annual rent. However, this is still one of those things that you need to ask about before you assume that’s going to be okay with your landlord’s requirements. Some want a single guarantor exclusively.

What Should Your Real Estate Agent Know About Guarantor Use?

Every apartment will have its own unique policy, which means that pairing you with the right apartment isn’t always going to be easy. If you believe you will need one to rent in New York or anywhere else, you should tell your agent as soon as possible. This way, they can make sure to pair you with an apartment that would work well with the lifestyle that you want to lead.

At NestApple, our brokerages are trained to help match you with the best possible home for your budget and lifestyle. Give us a call if you want to find that dream apartment, co-op, or house. We are here to make things easier and give you advice throughout the process.

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, this is no longer the case with the recent enactment of New York’s Housing Stability and Tenant Protection Act of 2019 (“HSTPA”). 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, 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 one independently.

Written By: Ossiana Tepfenhart

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