How do you screen co-signers and guarantors?

1 Define your criteria

Before you accept any co-signers or guarantors, you need to define your criteria for them. You should have a clear policy on when and why you require a co-signer or a guarantor, and what qualifications they must meet. For example, you may require a co-signer or a guarantor if the applicant has a credit score below a certain threshold, or if their income is less than three times the rent. You should also set the minimum requirements for the co-signer or guarantor, such as their income, credit score, rental history, and relationship to the applicant. You should communicate your criteria to the applicants and the co-signers or guarantors, and apply them consistently and fairly to avoid discrimination claims.

3 Request their financial documents

The most important step is to request their financial documents and verify their income, assets, debts, and credit history. You should ask them to provide their recent pay stubs, tax returns, bank statements, and any other sources of income. You should also ask them to authorize a credit check and a background check, and review their credit report and score, as well as any judgments, liens, bankruptcies, or evictions. You should calculate their debt-to-income ratio, which is the percentage of their monthly income that goes towards paying their debts, and compare it to your criteria. You should also assess their ability and willingness to pay the rent in case the tenant defaults, and whether they have enough savings or liquid assets to cover the rent for several months.

4 Interview them personally

The final step is to interview them personally, either by phone or in person, and ask them some questions to evaluate their character and commitment. You should ask them why they are willing to co-sign or guarantee the lease, and what is their relationship and level of trust with the applicant. You should also ask them if they understand the terms and responsibilities of the lease agreement, and if they are aware of the risks and consequences of co-signing or guaranteeing the lease. You should also ask them how they plan to communicate and cooperate with you and the tenant, and how they would handle any disputes or issues that may arise. You should also observe their demeanor and attitude, and look for any red flags or inconsistencies.

By following these steps, you can screen co-signers and guarantors effectively and protect your interests as a property manager. Co-signers and guarantors can be a valuable asset for your tenant screening process, as they can help you fill vacancies, reduce turnover, and increase cash flow. However, you should also be careful and diligent in choosing them, as they can also pose a liability and a hassle if they are not qualified or reliable.

5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?