How Can a Muslim Buy a Home in America With No Interest?
Buying a home in the USA just got easier for Muslims. Many banks are now offering zero interest programs to follow the Islamic guidelines of the Quran.
According to the Quran, Muslims may not pay any interest for credit or receive interest either. In dealing with banks, Muslims are looking for Islamic ways to purchase a home. There are several acceptable ways to do this.
- Seller Financing - Seller financing would include all creative financing done by the seller to sell his property without including the bank. This type of financing could also include lease options.
- Ijara or Declining Rent Schedule - Ijara is where the bank buys the home and rents the home back to the borrower for a certain term of years. As the money is reduced that is owed to the bank, the rent is also reduced on the home. Once the home is paid in full, the title is placed in the owner's name.
- Murahaba - Murahaba is the last type of Islamic program helping the borrower to own a home without interest. With this type of financing, the bank purchases the home and for an inflated price over what they paid, the borrower is allowed to purchase a home. The amount owed is amortized over the life of the loan and the word interest is never used.
Islamic Banks Located in America
The Bank of Whittier located in Southern California is apparently the only exclusive Islamic Bank in the US. According to Bankrate.com they have a three star rating and have 100 million in assets. A three star rating means the bank is performing.
The only riba free (interest free) bank in America gives them star status. There are other commercial banks who deal in Islamic Mortgages, but they are not true Islamic Mortgages according to the knowledgeable leaders of Islam. Regrettably though their banking officials refuse to give permission for their fees, down payment or polices to be disclosed.
The reason being is that the banks deal in interest on their other accounts. A true Islamic bank would have no part of the bank dealing with credit card purchases or interest bearing checking accounts. The other banks dealing in Islamic type programs are:
- JP Morgan Chase
- Deutsche Bank
- Devon Bank of Chicago
- University Bank of Ann Arbor, Michigan
Differences in Conventional Lending and Islamic Banking
Although they may be similar in looks, they are completely different in dealing with accounts and people. They are established with guidelines of Islam meaning that the bank is run ethically and not for mere profit. There are no interest dealings in the bank, but a sharing of the wealth.
This means that the borrowers all share in the profits and they also share in the losses, much like a mutual fund is run. The goal of a true Islamic bank is to make profits legally and ethically and therefore divide the wealth among the borrowers.
Wiseman, Paul (March 28, 2008)"Islamic Loans turn profit for banks in the USA" USA Today
Watkins, Simon (July, 15, 2003)"Keeping the Faith" This is Money.com
Huda, "Islamic Mortgages" About.com
Hansen, Steven (August 29, 2009) "Islamic Banking in America" Seeking Alpha.co
Photo courtesy of Photobucket/gilbien03