The Rental Process
While exceptions may apply, the typical minimum requirements for renting an apartment in New York City are as follows:
FAIR HOUSING
In 2008, the New York City Council passed what may be the most liberal housing discrimination law in the country. It amended the New York City Human Rights Law to prohibit discrimination in the rental of units based upon a person's lawful "source of income." What this essentially means is that landlords and real estate agents cannot refuse to show and/or rent apartments to people just because they receive Section 8 benefits, unemployment, welfare benefits, and/or any other benefits. Moreover, one cannot have a different set of rental requirements for persons who receive such benefits.
Application: The application is typically a one-page document that will provide a landlord with an applicant's professional, financial and personal background information required when applying for a rental property. Each real estate company/broker has their own method of running credit - some take only cash, others certified checks, others personal checks or credit cards. (A credit check is only applicable for US residents and sometimes Canadian residents). The application is what starts the process of renting the apartment and is not binding, clients can still submit applications on multiple properties if they so choose. Always confirm if the apartment is still available before running a client’s credit.
Application Fees: The application fee is always non-refundable. Each roommate and/or guarantor is required to submit an application and pay the app fee.
Credit Check: By "running credit", a landlord is getting a credit score, which is a number between 300 and 850 that represents how likely your clients are to pay their bills on time. There are three credit bureaus that determine your score, and they all have different formulas, but your landlord will likely choose the middle score. So, if you get scores of 690, 710, and 730 - they'll go with 710. Anything under 700 will concern most landlords; they might reject clients or require they pay a few months’ rent upfront, or more months as a security deposit or use a guarantor to minimize the risk that rent doesn’t get paid on time.
Bad credit is the most common reason applicants are declined by landlords. An occasional late payment is not usually a problem, however; a pattern of late payments, charge-offs and/or judgments will make it difficult for your client to rent an apartment. A Landlord/Tenant dispute will show up on a credit report and almost certainly cause an application to be rejected.
Credit Reports are Assembled and Maintained by Three Major Credit Reporting Bureaus:
There are other credit reporting bureaus, but they are not used nearly as frequently as these three titans. These credit bureaus collect information about a person’s credit history: credit cards, auto loans, student loans, mortgages, judgments, and so on. They maintain this credit history for years, but the last two years (24 months) is the timeframe of the most importance.
What is FICO?
Fair Isaac Corporation. It is a publicly traded corporation that provides software that utilizes information in a credit report to calculate credit scores.
There are a number of different credit scores available, but FICO scores are used by over 90% of creditors in the United States. FICO calculates 49 different credit scores. The different scores are designed to suit different needs. For example, the score used to assess if a consumer should be granted a $500 store credit card is different than the score used to decide whether a consumer should be granted a car loan. Each credit reporting bureau has its own method of calculating scores (although they are fairly similar to one another). The way scores are calculated is also updated frequently, so it doesn’t take long for the different scores to become available. The basic FICO credit score is the one most frequently used, especially by credit card companies. This is also the score that consumers see if they request a credit score. This score ranges from 300 – 850, with 300 being high risk/poor rating, and 850 being low risk/excellent rating.
CREDIT SCORE RANGES |
|
720+ |
EXCELLENT |
680 - 719 |
GOOD |
620 - 679 |
AVERAGE |
580 - 619 |
POOR |
<580 |
BAD |
Income Requirements: Most landlords require tenants to make 40-50 times the monthly rent of the apartment as their annual salary. In most cases this must be guaranteed income and does not include bonuses. (i.e.: If the property is $2,000.00 a month, you must earn $80,000.00 to $100,000.00 a year in order to qualify to rent the property.)
Guarantors: Guarantors are usually required if credit is problematic, income is insufficient (less than 40 times the monthly rent), length of current employment is limited (less than one year), or the employer/occupation is deemed “questionable” (i.e., working for a small upstart company, working on a part time or freelance basis, etc.). If an applicant does not meet the financial requirements the landlord may require a Lease Guarantor. This person is responsible for the rent if the tenant fails to pay it. They are generally required to go through the same application process as the tenant and earn 75 to 100 times the monthly rent as annual income. Most landlords prefer a tristate guarantor (someone who lives in New Jersey, New York or Connecticut) however this will vary from landlord to landlord. International Guarantors are NOT permitted.
REQUIRED PAPERWORK
Once your client has submitted the application with the application fee, typically the apartment will be taken off the market for 48 – 72 hours. This time frame gives your client the opportunity to gather and submit all paperwork required for an approval.
Letter of Employment: This letter must be prepared on company letterhead and signed by your client’s supervisor. It should state your client’s position, start date, salary and if applicable, guaranteed bonus. It should also indicate whether or not your client is entitled to a housing allowance and if so, how much.
Pay Stubs: If your client has been working the same job for at least a year they might be required to furnish their previous 4 – 6 weeks of Pay Stubs to verify income.
Tax Returns: In some instances, your client may be asked to show tax returns, so it is a good idea to have your clients bring the last two years returns with them.
CPA Letter: A letter from your clients Certified Public Accountant or CPA is required if your client is self-employed.
Bank Statements: Your client should be prepared with at least the last two months’ bank statements.
Photo Identification: Driver's license, passport, or other form of government issued photo ID will be required.
Landlord Verification Letter: Letter from previous landlord stating tenant was in good standing.
Reference Letter: Personal and/or professional reference letter shedding light on prospective tenant’s background.
Asset Verification: In certain instances, your client may have to use “Asset Verification” to qualify for an apartment. If your client is Retired or living off a Trust Fund:
The Budget: For obvious reasons, a budget is an important factor in determining what apartment or rental property a renter can afford. The price of a property depends on a variety of factors - size, location, condition, features, neighborhood amenities, schools among others. It is key to determine a budget at the beginning of the application process to have an understanding of what you can afford.