Property management & leasing
Guarantor: Definition & Example
What Is a Guarantor?
A guarantor is a person who signs an agreement promising to pay a tenant’s or borrower’s obligations, such as rent, if the tenant or borrower does not pay.
What does guarantor mean?
In rental housing, a guarantor signs a lease guaranty, either a separate agreement or an addendum to the lease, and agrees to cover unpaid rent and sometimes damages. Guarantors are common for students, first-time renters, people with thin credit files, and applicants whose income falls below the property’s requirement.
Because the guarantor is the landlord’s backup source of payment, guarantor requirements are often stricter than tenant requirements. In New York City, for example, landlords commonly look for guarantor income of around 80 times the monthly rent per year, compared with about 40 times for the tenant.
Guarantors usually go through their own screening. That often includes a credit check they authorize and proof of income such as pay stubs, tax returns, bank statements, or a bank-connected income report.
Guarantor example
A college student applies for a $1,500 per month apartment but has no income history. Her father agrees to act as her guarantor. The landlord requires guarantor income of 80 times the rent, or $120,000 per year. The father earns $135,000, provides proof of income, and signs the lease guaranty. If the student misses rent, the landlord can collect from him.
Related terms
- Co-SignerA co-signer is a person who signs a lease or loan with the primary applicant and becomes legally responsible for the debt if the primary applicant does not pay.
- Co-ApplicantA co-applicant is a second person who applies alongside the main applicant and will share legal responsibility for the lease or loan if it is approved.
- Proof of IncomeProof of income is documentation showing how much money a person earns, such as pay stubs, tax returns, bank statements, an employer letter, or a benefits statement.
- Thin Credit FileA thin credit file is a credit report with too few accounts or too little history to generate a reliable credit score. People with no credit record at all are called credit invisible.
- Lease AgreementA lease agreement is a contract between a landlord and tenant that sets the rent, the term, and the rules each side must follow while the tenant occupies the property.
Guarantor FAQ
- What is the difference between a guarantor and a co-signer?
- In everyday use the terms overlap. On a lease, a guarantor usually signs a separate guaranty and is only liable if the tenant fails to pay, while a co-signer typically signs the lease itself. The exact liability depends on the documents signed.
- How much does a guarantor need to earn?
- It varies by landlord and market. A common New York City standard is annual income of about 80 times the monthly rent. Other markets often use a lower multiple.
- Can a guarantor live in another state?
- Many landlords accept out-of-state guarantors, though some require the guarantor to live in the same state. Check the property’s criteria.
