Best Guarantor Insurance to Rent Apartments in New York
When you’re first starting your life in New York City, there are a lot of terms that you may start to hear relating to your apartment hunt.
“Rent-stabilized” is a term that you might hear. Then, there’s a “guarantor”.
Hearing someone talking about guarantors was almost exclusively a NYC thing, although recently this concept is popping up in many major U.S. cities.
If you’ve been wanting to move to the Big Apple, learning about what guarantors can do may make your transition to the city easier.
Best Guarantor Insurance Services for Rentals in New York
Insurent Lease Guaranty
Co-signing Guarantor Services in New York
- A guarantor is a person or company that acts as a guaranty on your lease, in cases where your credentials fall short in order to qualify on your own.
- Both you and your guarantor will have your credit history and income information submitted for consideration.
- Using professional guarantor insurance is a popular option for those who cannot find a guarantor within their personal network.
- The three main companies providing guarantor services are Insurent, the Guarantors, and Leapeasy.
- Each company has its own criteria and fee structure so, it's important to investigate the pros and cons of each company carefully.
- You will also need to submit your FICO score as well as income documentation to these professional third-party guarantors, but their requirements are more relaxed than most landlords'.
What is a Guarantor?
If you’ve ever lived abroad, chances are that you’ve heard the term before.
Guarantors are originally a British phenomenon.
They are used as a way to professionally guarantee that you will be able to afford rent when your income, credit score, or financial situation doesn’t match traditional standards.
For all intents and purposes, a guarantor can be seen as a co-signer.
Reasons You May Need a Guarantor for Leasing an Apartment
It’s clear that New York City apartments are not easy to get into, especially if you’re looking for an affordable apartment before you actually have the income you expect to have.
Qualifying for an apartment in New York is notoriously difficult and some cases more difficult than qualifying for a mortgage.
You may need a guarantor if any of the following are true:
You don’t make 40 times the rent per year
The “40 Rule” is a classic requirement among landlords in New York City. If you make less than the magic number, you may be asked to get a guarantor.
Your credit score is too low
Most landlords want to see a credit score of 700 or close to that for top-rated buildings.
If you don’t have that, then you might need to get a guarantor.
The landlord asks for one
Landlords reserve the right to ask for a guarantor, with or without reason.
Some of these reasons could be that your credit history or employment history is not long enough, you have questionable remarks or items in your credit history, or you don't seem trustworthy to the landlord.
How Do I Find a Guarantor Who is Not Family or a Friend?
Professional or third-party co-signing companies do exist and they can get you approved for an apartment you wouldn't qualify for on your own.
Companies started to pick up on the fact that people need help finding guarantors.
To meet that need, they created unique legal financing groups that act as rent insurance and a way to guarantee that you’ll make rent.
Since then, companies like the Guarantors and Insurent Lease Guaranty have been popping up around every corner.
It’s been easier to get a guarantor ever since.
Their existence means that you can get a guarantor for a nominal fee—often around the equivalent of a month’s rent or so.
This may be the perfect option for someone who doesn't qualify for an apartment but doesn't want to get their parents, best friend, or a co-worker involved.
How Do These Professional Guarantor Services Work?
The third-party services do not have to qualify in the same way a conventional guarantor would. These services offer a guarantee or insurance in the case of missed rent.
So, if you become delinquent on your rent for any reason, the landlord will still get their money. Instead, you owe money to the insurance company.
Different companies have different payment structures, so it's important to review each one.
Some of them ask for a one-time fee, while others may charge additional fees for different scenarios.
If the landlord is not already working with one of these services, they can easily get information and sign up with the one you are working with, granted that they are willing to work with them.
What are the Requirements to Qualify for Guarantor Insurance?
Though it’s easier to get a guarantor these days, it’s not a “free for all” by any means.
Guarantor companies still have requirements that they have in place when it comes to approving clients.
These are what you need in order to get approved in most cases:
Proof of Income
You will need to make 27 times the amount of rent you want to pay per year. This income has to be backed up with pay stubs or tax documentation.
The bare minimum FICO score that you will need in order to get a guarantor is 630.
If you don’t have the income or the FICO score, you might be able to get a guarantor by having assets that are 50 times worth a month’s rent.
However, this is on a case-by-case basis.
How Much Will I Need to Pay For a Guarantor?
How much a person will pay varies based on which company you choose, your citizenship, as well as the proof you have of your financial status.
A renter can expect to pay anywhere from 60 to 95 percent of what they expect to pay for rent.
Remember, that if you default on your rent payments, while your landlord will be covered by the third-party guarantor, you are still on the hook for the rent payments.
The rent payments should be made to the insurance company.
Top Guarantor Companies in New York
If you’re in need of a guarantor, chances are high that you’re going to need to go through one of three companies.
Not sure where to begin?
We decided to put together a handy chart that shows the differences between the three, plus a quick blurb about each one.
|Company Name||The Guarantors||Insurent Lease Guaranty||Leapeasy|
|Minimum FICO||550 is bare minimum. 630 is most common||"Decent to good" credit||Unknown|
|Income Requirements||Usually 27 times the rent.||27.5 times the rent. However, they can still help if it's lower, depending on cash assets.||Unknown|
|Rates||4.5%-7% for US residents. 7%-10% for non-citizens.||70%-90% of a month's rent for US residents. Up to 110% of a month's rent for non-residents.||"Under a month's rent."|
|Fees||Rate is stable. Additional fees may apply based on FICO||A one-time fee as per rates.||One-time fee.|
The Guarantors are one of the oldest guarantor companies to operate in New York City, and to a point, their staying power speaks for itself.
They’re known for being flexible when it comes to their coverage and for having excellent customer service.
Who is the Guarantors it right for?
This might be the company for you if prize transparency above all.
As one of the most upfront about their requirements and fees, the Guarantors are a great pick for people who don’t want surprises when it comes to their paperwork.
They also are known for being avid educators about everything involving NYC’s rent reform.
Insurent Lease Guaranty
Insurent might just be the Guarantors’ biggest competition.
Like the Guarantors, they have a long reputation for doing right by their renters.
Who is Insurent right for?
Insurent is best for someone who wants to save on fees.
Their requirements are a little stricter than their competition, but it comes with a major perk. According to their site, Insurent offers up the lowest fees in the industry.
Moreover, there are no additional fees to expect with them, making their offers extremely affordable.
One major caveat you need to be aware of is that they only will guarantee buildings they have a partnership with.
So if you need a guarantor, make a point of seeing who Insurent works with first.
Leapeasy is relatively new to the rent guarantee circuit, but that doesn’t mean they can’t be a good choice for the right person.
Like Insurent, they make a point of only partnering up with specific landlords that they service. However, that can mean better rates for the right person.
The problem that many people will find with Leapeasy is their lack of transparency. They take each renter on a case-by-case basis.
Who is Leapeasy Right For?
What we do know is that they allow people who have decent to poor credit to get help through their company as long as they have something to balance the risk out.
They are open to working with non-citizens. As long as you are 18 and have the right documents, they’ll be happy to look over your application to find out how they can help you.
Important Considerations When Using a Guarantor Service
Although finding a third-party professional guarantor sounds like a dream come true, especially if your income is a little low or your credit is not high enough, don't get carried away with excitement.
As when finding any guarantor, you still need to be responsible. That means conscientiously making your rent payments on time.
A professional guarantor service is no time or excuse to skip one month of rent "just because"!
You will still be on the hook for the rent, even if the insurance will cover your rent.
The guarantor service only ensures that your credit will not take a hit and/or that you will not be evicted or your lease terminated.
Because each vendor has different requirements, it's important to do your own research of each company.
For example, the Guarantors performs a soft pull on your credit, but it's not clear if Leapeasy or Insurent does as well.
If that's the case, you'll need to weigh how pulling your credit multiple times during the apartment-hunting process will affect your credit.
Learn about any potential hidden costs that can be incurred, and carefully review their refund policies.
Who Else Can Be Your Guarantor?
Traditionally, a guarantor acts as a co-signer on your lease.
In many situations, guarantors would be someone like your family member, spouse, or close friend.
However, times have changed.
The requirements for being a guarantor are high, and you will be expected to show paperwork that backs up their qualifications.
Guarantors Must Be Able to Show High Income and Great Credit
Guarantors are typically required to make 80 to 100 times the cost of a month’s rent.
That means if the apartment you want is $2,500 a month, your co-signer must show they make $200,000-$250,000 a year.
Unless your uncle is Bill Gates, chances are good that you won’t be able to get a family member to co-sign and guarantee your lease.
Furthermore, guarantors are held to a higher standard. So the standard credit requirement doesn't apply. Many landlords want to see a 740 or better from a guarantor.
Guarantors Must Provide Proof of Income
Two years’ of tax returns, four pay stubs, personal identification documents, and more might be needed to show that they really make as much as they claim to make.
It's not only a lot of trust you're asking your guarantor to place in you, but they need to also bother to gather paperwork and show potentially private or sensitive information.
When submitting an application, you will have to hand over all the paperwork to the landlord or realtor for processing.
If you’re really struggling with getting help, you might even need to compile everything into a folder yourself.
Sounds like a lot? Many people aren’t able to find a guarantor that satisfies New York City standards the old fashioned way.
Lately, things have been changing so that people can get a better shot at getting into apartments.
To get a more in-depth understanding read: What is a Guarantor for a Rental Apartment?
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