Can you ask for financial obligations on application?

Question

My husband and I are renting our townhouse for the first time and are really struggling picking the right tenant - we've had a lot of interest. We have it narrowed down to 3-4 people, who all seem like great fits. One application did not list out their financial obligations, which we're using to determine their debt to income ratio. Can I press them to list that information?

Also - 3 out of the 4 are non-married couples...do you guys find it higher risk of one person leaving in those situations during the lease, especially if the couple has not lived together before?

Nathan Gesner · Answer

Eric is completely wrong. He's a renter, not a Landlord.

The applicant's debts are absolutely pertinent! I had a tenant that applied for a $700 apartment. His income was $2,500 which was more than 3x the monthly rent. However, he had a truck that was costing him $700 a month in payments and insurance! It was a gas guzzler so you could easily add another $200+ to his monthly expenses. Credit cards and student debt rounded it out. After considering his existing debt, his rent to income ratio was closer to 50%.

It doesn't matter how much you make; it matters how much you have available to spend.

Adam Azam · Answer

You can make the strongest wage earner the primary tenant, the person to stay if relationships fail.

If I were you I would change my personal income standard and look at maybe adding other standards that reduce your risk of tenants not following through, such as looking at how long they have had their jobs and how long they have co-habitated.  Neither of those are discriminatory since they don't address marital status or another protected class.

Evelyn Randolph · Answer

@Nathan G.  Totally agree!  What about the applicant making 4000/month trying to rent a $725 unit thst I dealt with a few weeks back? Rent is definitely greater than 3x the monthly rent, but he has three kids with three different women, paying $1600 in child support total and a $800 truck note.  You have to get personal and get in their business to really understand their financial picture, else you're potentially stepping in to a lot of trouble.

Curtis Mears · Answer

@Eric Weldon-Schilling

I disagree with your assessment. I pull a credit bureau on every applicant. I am entitled to know if you pay your obligations on time or not before I rent a 150k or more assett to you. Also, if you have maxed out every credit card, I may want to know that also. I also want to know if you pay your rent, so i will call every landlord you list, and if you have years with no housing listed, I will ask you about that also. One of a landlords primary responsibilities is to make sure the tenant can afford the property.

Michael Robbins · Answer

@Lauren Hulsman If you run their credit it should list open and closed accounts.  The screening I use also includes balances on credit cards, auto loans, etc... What can help a ton is having a list of your minimum tenant required qualifications.  ex: minimum income 3x rental amount, minimum credit score, etc... Ensure to follow all fair housing.

Michael F Doherty · Answer

Best to pay for a credit report and ask for a W-2 or several pay stubs and verify employment.

My limited experience is that any couple, two friends, etc etc is a risk compared to one person whose name is on the lease. Families with kids are mostly a good bet. No matter how well you vet you will someday rent to a bad tennant.

Account Closed · Answer

Remember though, any data you look at is a snapshot in time. The income could disappear tomorrow. Tenants can go out and buy expensive cars after they move in. Couples can break up, roommates can leave. If you are not comfortable with these risks, then maybe being a landlord is not for you.

You should screen but don't get carried away with looking for "the best" tenant. Because the best tenant can turn into a disaster with a change of circumstances.

Lauren Hulsman · Answer

Account Closed fair enough. Like I said, this is our first time and I’m researching as much as possible to ensure we have the right tenant and making sure we have the most financially secure tenant as this has been my personal home for 7 years, not some random apartment building I own. I’ve also been reading that debt to income ratio is less important as long as they satisfy the 3x rent income, so we are opting to not stress the financial obligations.

Curtis Mears · Answer

@Eric Weldon-Schilling

As a landlord, I do not ask for obligations on an app. Seems a waste of time to me. I pull the credit app and I get everything I need to know. Maybe 20 years ago would require obligations, but the internet has been around for a while and credit bureaus give me all the info I need.

Billy Smith · Answer

The whole process is based on rigid methodology of credit scores, past rent history on and on. Cost me $35.00 to have a 3 party do it.

Can you ask for financial obligations on application?

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