Cosigners. Some landlords are firmly against them, while others cater to tenants who may need one. As a landlord, it's your choice whether you allow cosigners. If you choose to allow cosigners, you need a solid strategy on how to vet them.
What is a Cosigner?
A cosigner is responsible for payments that the tenant doesn’t make. They sign the lease agreement along with the tenant, which means they agree to abide by the lease terms. Therefore, the cosigner suffers the same consequences as the tenant if the tenant violates the lease. If the tenant does not make a payment, it is up to the cosigner to make the payment or else both the tenant and cosigner may get evicted.
Since the cosigner signs the lease, they get penalized for non-financial issues as well. For instance, if a tenant gets evicted for noise disturbances, the cosigner will also have an eviction on their record.
Why Would a Tenant Need a Cosigner?
Most people are good candidates for cosigners if they don’t have a credit history, have a low credit score, don’t meet income requirements, or lack rental history. A cosigner is like an insurance policy for the renter, but they don't solve all issues. It’s vital to know when to approve a tenant and cosigner.
Cosigners typically work best when a potential tenant meets most of your criteria but are missing a few aspects. For example, a person who meets the income requirements but has no credit history is usually a good candidate for a cosigner. In this situation, their cosigner should have an excellent credit score and meet income requirements. Someone with a low credit score and not enough funds to sufficiently cover the tenant’s rent and their own living costs should not be considered a viable cosigner.
There are circumstances where a potential tenant is a good fit for your property, but they completely rely on their cosigner. For example, a person with no credit history or income (usually students) could be reliable if their cosigner has an excellent credit score, and the cosigner’s income sufficiently covers their living costs and the tenant’s living cost. In a situation like this, it’s essential to err on the side of caution. Thoroughly screen your applicant and their cosigner.
Cosigners are not a solution to tenant behavior. If the potential tenant has a history of damaging rental properties, noise complaints, or other non-financial lease violations, they might not be the best fit for your property.
Luckily Apartments.com makes it easy to screen tenants, get the information you need, and find a qualified renter fast. Unlike our competitors, who use various third-party resources to collect information, we partner with TransUnion to provide you with screening reports for evictions, credit, and criminal history. Another feature you’ll find only on Apartments.com is support for co-signers, guarantors, and co-applicants. If you need more information to make a decision, you can request supporting documents from potential tenants directly on our platform. Get all the information you need to find the right tenant quickly and easily.
Should You Require Rental Applications for Cosigners?
A cosigner signs the lease agreement like the tenant does; therefore, you must screen cosigners as thoroughly as you screen your tenants. All potential cosigners should fill out a rental application, provide proof of income, and agree to submit a credit and background check if your state allows.
It’s vital to collect two to three documents that verify the cosigner’s income. If the cosigner does not live in the property, they need an income that covers both their housing as well as the tenant's rent. Ask the cosigner to supply you with a copy of their lease or mortgage statement, so you can make an informed decision.
If your state laws allow it, run a credit check on the potential cosigner. A cosigner should have an excellent credit score. Look for past evictions, amounts owed to collections agencies, and other outstanding debts.
Pros and Cons of Cosigners
No law requires landlords to allow cosigners, so the choice to let tenants have cosigners lives solely with the landlord. If you’re considering allowing cosigners, weigh the advantages and disadvantages.
Pros
One of the biggest advantages of allowing cosigners is that you’ll have a larger pool of potential renters without sacrificing your rental income. Some renters might have circumstances that make it harder to verify income or don’t have established credit yet, but they might turn out to be a responsible tenant.
Cosigners also benefit landlords in states with a cap on the amount you are able to charge for security deposits. Typically, renters with low credit scores pay higher security deposits. In states where that’s not allowed, requiring a cosigner may be best.
Cons
The main issue to consider with cosigners is that they don’t solve all problems. Cosigners are usually a solution to financial issues, but they don’t ensure that the person is a good tenant. Noise complaints, damaged property, and other non-financial lease violations aren’t solved with a cosigner. If you do allow cosigners, you must thoroughly screen potential tenants.
Deciding whether you take cosigners is not an easy decision. While it gives you a wider tenant pool during tight times, it doesn’t eliminate all potential issues with them.
Just because someone needs a cosigner is not always a reason to reject an applicant. Just be extra cautious when working with a tenant who needs a cosigner.
