When Is a Cosigner Needed?
There are times when a tenant needs a cosigner. Perhaps the tenant is a young person who has not yet established a rent or employment record. Or the tenant’s credit record is not good. Sometimes a tenant, through frugal spending habits, can actually pay the required rent, but doesn’t meet the basic income requirements of the industry. Most professional landlords require that a tenant’s yearly rent not exceed 30% of their gross income, i.e., salary before any deductions for taxes, etc. Thus, to qualify for an apartment renting for $9,000 per year, a tenant must have $30,000 gross income.
If, by any chance, a tenant has significant savings, he or she can probably negotiate a year’s lease by paying a significant amount of rent in advance. For most people however, seeking a cosigner may be the best alternative. A landlord does not have to accept a cosigner, but many do.
A cosigner, to be acceptable, usually has to meet all the qualifications of a tenant who would normally qualify for the apartment: good credit and employment record and sufficient income. It helps to have a cosigner who lives in Maryland, though some landlords will accept cosigners who live out of state.
Understand the Risks of Cosigning
Cosigning a lease is a serious responsibility that should not be taken lightly. Tenants seeking a cosigner should not underestimate the risk that they are asking someone to assume. If a tenant cannot really afford or can’t budget his/her money properly and defaults on the lease, then most landlords will seek payment from the cosigner even if they have to take him/her to court. Simply because a cosigner does not reside in the property does not mean that they cannot be held accountable for the rent.
Furthermore, a cosigner must know whether they are responsible for only the first year of the lease or for renewals thereafter-- as is usually the case. If tenants have been paying their rent on time during the first year, and should their incomes improve enough to have the apartments on their own, then before their current leases renew, they should seek to have non-cosigned leases for the future. If the tenants are unwilling to do this, and the cosigner wants to be relieved of future potential liability, then the cosigner should send a written notice to the landlord, before the lease renews, that at the end of the current lease he or she will no longer be a cosigner.
Sometimes, especially in the case of students, there are three cosigners-- perhaps one from Maryland and two from out of state. The Maryland cosigner and the Maryland tenant should be aware that the landlord can sue one or all of the cosigners, and it is easier to sue locally than out of state. If the Maryland cosigner has income and assets, they may be the only one sued (and then he/she would have to sue the other cosigners).
A cosigner may be a good option, especially for students.