While landlords and property managers may use several factors to determine whether to approve a prospective tenant, gross income is a chief consideration. In an October 2012 national survey of property managers, Rent.com found income to be the single most important selection factor. The survey also found that the majority of property managers expect the renters gross monthly income to be at least three times the monthly rental rate. If a renter does not have sufficient income of her own, a landlord may consider using a cosigners income.
How It Works
A cosigner helps to balance a tenants income or credit standing, making the tenant less of a risk. Usually a friend or family member, cosigners must be both financially stable and creditworthy. They agree to be equally responsible with the potential tenant to make sure the rent is paid on time. If the renter does not pay on time, the cosigner can be liable for any rent owed to the landlord.
Because their own finances and credit ratings are at stake, prospective cosigners must be fully educated on the benefits and risks of cosigning a rental application. While the short-term benefit may be helping a friend or family member who is in need, the cosigner takes on a long-term risk of the loss of money or a lowered credit rating if the rent is not paid on time.
Before asking a friend or family member to cosign a rental application, ask the landlord if a cosigner can be used not all landlords will allow prospective tenants to use a cosigner. To prepare the cosigner, determine the financial information the cosigner will need to provide to the landlord, such as tax returns, check stubs and bank statements. Some landlords place a heavy emphasis on a cosigner's annual earnings -- they may expect that the cosigner earn annually up to 80 times the monthly rent .
Asking a friend or family member to financially guarantee payment of the rent is not an inconsequential proposition. While using a cosigner may not be an option in every case, the cosigner can help balance lower earnings or credit challenges. This can make the difference in being able to rent an apartment, ultimately making housing more accessible.