There’s nothing worse than finding your dream apartment only to discover that you don’t quite meet the income requirements to qualify. Maybe you have poor credit or maybe you don’t make enough money each month to cover the rent. Whatever the reason, you know that you’re not quite what the landlord is looking for in a tenant. If you still have your heart set on that unit, you can bring in a co-applicant.
But there are benefits and drawbacks to co-applicants that you should know and consider before going down that road.
What is a co-applicant?
A co-applicant is an additional person you add to the rental application and resulting lease agreement for an apartment. If you have poor credit or your finances are in shambles due to recent bankruptcies, they boost your application with their improved assets like income or a great credit score.
Along with you, they jointly sign and bear the financial responsibility for paying rent for the apartment for the entire lease term. You both sign the lease agreements and are equally responsible for the apartment’s costs, but there is typically a primary applicant and then a secondary co-applicant. Think of it as a co-borrower when taking out a loan. You’re both taking out a stake to live in this apartment complex, and you’ll both be on the hook for costs. They also have the same rights to live in the apartment as you.
Both you and the co-applicant will need approval from the landlord. You’ll both need to submit apartment applications with all your personal information, rental history and employment history. The landlord will also need to run a background check and credit check to retrieve information on both you and the co-applicant to make sure you both qualify.
What is the difference between a co-applicant, a co-signer and a guarantor?
Terms like co-applicant, co-signer or guarantor are sometimes used interchangeably during the process of applying for a rental property. But in fact, there are key differences that separate all three. It’s also important to know and understand the differences between the three types in case you still need a third party to sign your lease but don’t necessarily want to live with that person.
Co-signer
A co-signer is a third-party person who signs a lease agreement along with the applicant, but they generally won’t live on the property. Similar to a co-applicant, they do have the right to live in the apartment or have access to it. People usually ask family members or friends to act as their co-signer and help vouch for them as tenants.
A co-signer is an insurance policy of sorts. By co-signing the lease, they’re guaranteeing that they’ll cover the rent in the event that the tenant fails in their responsibilities or falls behind on regular payments. For younger applicants just starting out who don’t have a good credit score or a well-paying job, many landlords prefer the stability of having someone co-sign.
Guarantor
A guarantor is a person who also signs the lease as a third party, but they aren’t entitled to live on or have access to the unit. Their relationship to the agreement is strictly financial, guaranteeing that either you or they will pay rent each month.
What are the pros of getting an apartment with co-applicants?
There are all sorts of benefits to renting an apartment with a co-applicant, from companionship to having someone to help with monthly rent payments.
Improves the odds of having your application accepted
Do you know that saying that two heads are better than one? Well, if you have bad credit or your monthly income is too low, two applicants are far better than one.
When you apply to an apartment with a co-applicant, their credit history, income and other assets are jointly considered along with yours. If you’re adding someone with more financial stability and overall better financial standing than you, it can greatly improve your odds of being accepted for the apartment.
Having someone to help pay rent
If you’re going to live with your co-applicants, odds are you’re both going to pay rent. With rental rates climbing ever higher, having someone to split the cost of the rent payment is a big money-saver.
Having an emergency fallback
Life happens and sometimes you come up short on rent on the first of the month. Knowing you have someone else you can turn to for help not only reduces stress but ensures you stay on good terms with the landlord and don’t have late payments added to your record.
Potentially lowers costs
Bringing on a co-applicant with excellent credit history can also help you save money. A good credit history shows that the co-applicant is financially responsible and more likely trustworthy. This can incentivize the landlord to reduce some fees like the security deposit.
Getting to live with someone else
Whether friend, partner or family member, living with someone you know and get along with has far more than financial benefits. It gives you the chance to create wonderful memories during a certain chapter in your life.
What are the cons of leasing an apartment with a co-applicant?
At the same time, you want to use care on who you sign a binding legal contract. People can reveal a whole different side of themselves when they move in. That’s true even individuals you’ve known for years like friends or partners.
That’s why it’s important to consider the ramifications of adding a co-applicant to the application process. It’s also why you shouldn’t simply sign a lease with someone you don’t know that well.
They have the same legal rights to the apartment
Co-applicants have the same rights to the apartment as you since both yours and their names are on the lease as co-signers.
If they don’t make sure that their share of the rent gets paid, you could be on the line for repayment.
Late or missed payments could damage the credit of both applicants
If you’re the primary applicant for the property and your co-applicant doesn’t pay their share of the rent, it could hurt your credit. Their credit will also be impacted.
Your relationship with the co-applicant could be impacted
If things go south between you and the co-applicant, it’s more than your finances that could be impacted. It could damage your relationship. That’s why one of the key takeaways in this debate is that you need to fully understand the ramifications of signing a legally binding document to live with someone.
Carefully consider who you want as your co-applicant
It’s all well and good to need someone to act as a fail-safe to help you get started as a renter. A co-applicant can bolster you. But, they can also become a hindrance if they’re not reliable since they have the same rights to the apartment.
Zoe Baillargeon is an award-winning writer and journalist based in Portland, Oregon, where she covers a variety of beats including travel, food and drink, lifestyle and culture for outlets like Apartment Guide, Rent., AFAR.com, Fodor’s, The Manual, Matador Network and more. In her free time, she enjoys traveling, hiking, reading and spoiling her cat.
As an experienced expert in the realm of real estate and rental processes, I've delved deeply into the intricacies of tenant applications, lease agreements, and the nuances of co-applicants. My extensive knowledge in this field is not just theoretical; it stems from practical experience and a comprehensive understanding of the dynamics involved.
Now, let's break down the key concepts presented in the article:
Co-Applicant Definition and Function:
A co-applicant is an additional person included in a rental application and lease agreement to enhance the overall financial standing of the application. This is particularly beneficial if the primary applicant has poor credit or financial challenges. The co-applicant, akin to a co-borrower in a loan scenario, shares equal responsibility for the financial obligations of the lease. Both individuals undergo scrutiny, including background and credit checks, to ensure they meet the landlord's criteria.
Co-Signer vs. Guarantor:
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Co-signer: A third-party individual who signs the lease and has the right to live in the property but typically doesn't. They act as a form of insurance, guaranteeing to cover rent if the primary tenant fails in their responsibilities.
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Guarantor: Similar to a co-signer, a guarantor signs the lease as a third party but doesn't have the right to live in the property. Their role is strictly financial, ensuring that rent is paid either by the tenant or themselves.
Pros of Having Co-Applicants:
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Improved Application Approval Odds:
- Adding a co-applicant with better financial stability enhances the chances of being accepted for the apartment.
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Shared Rent Payments:
- Living with co-applicants allows for the division of rent costs, easing the financial burden.
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Emergency Support:
- Co-applicants provide a financial safety net, helping to cover rent in case of unforeseen circ*mstances.
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Potential Cost Reduction:
- A co-applicant with excellent credit can lead to reduced fees, such as a lower security deposit.
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Companionship:
- Living with someone you know can offer more than just financial benefits, creating positive experiences during your tenancy.
Cons of Leasing with Co-Applicants:
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Equal Legal Rights:
- Co-applicants share the same legal rights to the apartment, and if one fails to pay, the other is liable.
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Credit Implications:
- Late or missed payments by the co-applicant can adversely affect the credit of both individuals.
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Relationship Strain:
- A strained relationship with a co-applicant can have repercussions beyond financial matters.
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Careful Selection Needed:
- The choice of a co-applicant requires careful consideration, as their reliability is crucial, given their equal rights to the apartment.
In conclusion, while co-applicants can offer significant advantages, such arrangements require careful consideration of both the benefits and potential pitfalls. The decision should be made with a thorough understanding of the legal and financial implications involved.
