Moving out from the family home as a first time renter is an incredibly exciting, yet exhausting and stressful process for many people. Whether you’re a young college student or a professional who’s been living with their parents to save money, eventually leaving the nest and finding a place of your own is pretty much inevitable.
However, taking out a mortgage right after leaving the parents’ home would be financially unfeasible for most people, which means your first independent living experience will probably be renting a room or apartment.
Renting is becoming the “new normal” in America, according to a June 2015 story from The New York Times, and statistics compiled by the Joint Center for Housing Studies of Harvard University confirm this new trend: 78% of the under-25 population consists of renters, and even one-third of 40-55 year olds are renters, too.78% of the under-25 population consists of renters, and one-third of 40-55 year olds are renters.Click To Tweet
Critical Problems You Could Face as a First Time Renter
If you’re about the join the millions of Americans seeking a place to live through the rental market, it’s very important to do your research beforehand to avoid some of the pitfalls that come with renting for the first time.
Misunderstanding How the Application Process Works
Before you even enter the rental market, it’s important to know what your tenant rights are and have your documentation ready to go for the application process. Personal information a landlord might ask for on the application includes:
- Social Security number (except in New York and California)
- Driver’s license
- Recent employment history
- Proof of income
- Personal references and their contact information
- Credit lines and bank information
- Rental history
Not having this information readily available can delay the application process, but lying or guessing on parts of the application might land you in a serious legal battle, so be sure to fill out the forms as accurately and honestly as possible.
There are a few other misunderstandings that might arise during the rental application phase of your search for a new place to live.
For example, some people are a little too gung-ho about searching for apartments and apply to as many as they possibly can in hopes of increasing their chances of securing a place right away. On the flip side, some people are very particular about their living quarters and turn down several promising prospects before setting their hearts on a place and sending in the applications.
The problem with these types of apartment hunters is that they really don’t understand the rental application process. Applying to several apartments is not only expensive – some rental agencies and landlords have nonrefundable application fees – but multiple applications can lead to quite a few hard checks on your credit record, which subsequently lowers your credit score.
Meanwhile, the person who only sends in one application might lose out on the place of their dreams if there’s already a qualified applicant ahead of them – many landlords have a “first come, first serve” policy – and delay their move-in date if they’re unable to secure an apartment right away.
A final note about the application process: know what you’re getting into. This sounds like common sense, but there are some awful landlords out there that you do not want to get stuck in a 12-month leasing agreement with. Be sure to ask your potential landlord several questions so you know everything about the property and their policies before you ever sign on the dotted line.
No/Bad Credit History
If you have no credit history or perhaps you made some mistakes with your credit cards when you were younger and now have bad credit, finding a rental unit might be difficult. There is no universal standard for credit scores on rental applications, but the SF Gate points out in their Home Guides section that 620 is usually the minimum credit score accepted by a majority of landlords and rental agencies.
Independent property owners – those who don’t work with a property management company – might have less stringent standards if you fulfill their other requirements, so if your credit isn’t too hot, try to start with properties managed only by the owner.
Instead of flat-out rejecting your application for falling below the minimum credit score guideline, some rental agencies might ask you to put down a larger security deposit to limit their financial liability. Other options include providing more extensive paperwork on your financial situation (tax returns, bank statements, etc.) to prove you have been financially stable for several months, which suggests you’re unlikely to bail on your monthly rent any time soon.
If you’re not in a hurry to move out immediately, you could wait a few months and work on improving your credit score before jumping into the crowded rental market.
No Rental References
You’re a first-time renter. That’s why you’re reading this article, right? So obviously you’re not going to have a history of landlord references and rental agency recommendations unless your family and friends count.
To avoid getting rejected on the basis of no rental history, there are a few things you can do to persuade a landlord to rent to you anyway, such as offering more money upfront (either in the form of a larger security deposit or the last month’s rent).
If you were planning on living with a roommate(s), you can possibly piggyback on their rental history while explaining to potential landlords that this is your first time renting a property from anyone.
It’s a lot harder to justify rejecting your application if everything else is perfect aside from the lack of rental references, and a quick explanation of your situation should do the trick. If you’re dealing with a particularly persnickety landlord, you can ask them to verify your good background through your personal references, too.
If none of the above options work, consider a short-term leasing option (e.g., month-to-month lease or even Airbnb sublets) to get some kind of landlord reference on your record before settling down.
Do You Need a Cosigner?
Do you have bad credit? Not enough provable, monthly income to qualify for the typical “Must make 2.5-3X the monthly rent” requirement? Or are you still facing problems on applications due to your nonexistent previous landlord references?
If you answered “yes” to any of these questions, then you might want to consider asking a cosigner to help improve your chances of getting approved for an apartment. In many cases, cosigners don’t need to worry about landlords checking their credit.
Rental agencies merely want some sort of reassurance – in the form of verifiable income and good standing – that leasing to potential tenants won’t end in financial disaster for them. A cosigner can be your parent(s) or your friend, but you may want to avoid asking a colleague or employer unless you’re on exceptionally good terms with them.
Alternatively, you could look into rental programs like LeaseLock, which is a nationwide lease default insurance program that can certify you as a viable candidate for a property and protect a landlord if LeaseLock was wrong about you.
Get Ready, Get Set: Move Out!
As a first time renter, you shouldn’t be stressful if you follow the above tips, ask lots of questions, and know exactly what you and the landlord are offering. Once you’ve rented one time, the process should get easier – assuming you don’t cause any headaches for your landlords – and maybe someday you’ll own your own properties and experience the landlord side of the rental relationship.
Are you a first time renter? What are some of the challenges that you found?