REFINANCING QUESTIONS

Refinancing can be very complex, which is why we want to help simplify the process for you. Read our answers to some commonly asked questions about refinancing a home.

Frequently asked questions

Click on each category to find answers to the frequently asked questions. If your question is not listed here, click on the chat icon at the bottom of the page to get a quick, real-time response. If we are not available live, do not hesitate to contact us by clicking on the Question Box in the bottom right corner of the page. We will respond as soon as possible.

Glossary of terms
Q. What is Guidance Residential?

Guidance Residential is the largest provider of Shariah-compliant home financing in the U.S. Guidance Residential has provided over $4.6 billion in home financing to Muslim American homeowners over the last 15 years, and the company holds nearly 80% market share in the U.S. Shariah-compliant home financing industry. Headquartered in Reston, Virginia, the company was established in the D.C. Metro area in 2001 and currently, the company is operational in 29 states. We are a member of Guidance Financial Group, an affiliated global financial group, which has pioneered the creation and development of Shariah-compliant investment products for institutional investors and financial intermediaries worldwide, as well as financial products and services that address the unmet needs of millions of Muslim consumers.

Q. What types of financing does Guidance Residential offer?
Purchase financing
  • Fixed and Adjustable rates for 30, 20, and 15-year contracts
  • Conforming and Conforming Jumbo financing
  • Single family, condominiums, townhomes, planned unit developments(PUDs) and 2 to 4 units financing
  • Owner occupied, secondhome and non-owner occupied (investment property) financing
Refinancing
  • Fixed and Adjustable rates for 30, 20, and 15-year contracts
  • Conforming, Conforming Jumbo, Home Affordable Refinance Program and cash out refinancing
  • Single family, condominiums, townhomes, planned unit developments(PUDs) and 2 to 4 units financing
  • Owner occupied, second home and non-owner occupied (investment property) financing
Q. What do you mean by Shariah-compliant home financing?

Shariah-compliant home financing is a type of financing that does not violate the principles of Islamic law. There is a set of rules and injunctions from the Quran and Sunnah regarding what is permissible and not permissible when it comes to the day-to-day financial transactions of Muslims. Among the prohibitions are riba (usury / interest), gharar (speculation or contractual uncertainty) and maysir (gambling), for example. When you finance your home with a conventional mortgage, it requires the payment of interest (riba), which is prohibited in Islam and all monotheistic and even some non-monotheistic faiths. Guidance Residential's Shariah-compliant home financing program does not involve riba. The Declining Balance Co-ownership Program that Guidance Residential offers is a participatory financing program, which is based on equity partnership between Guidance and the customer. The following are the unique differentiating factors of Guidance Residential's program from a conventional mortgage.

Co-ownership
Guidance Residential and homebuyers each own a percentage of the property as co-owners. Homebuyers increase their share over a period of time through a monthly payment that results in a corresponding decrease in Guidance's share.

Risk sharing
The risk is shared if the property is lost in the case of a natural disaster, or a public service project initiated by the government forces you out of the property. In this situation the proceeds provided by insurance or government are shared based upon the percentage of ownership at the point of the loss. In a similar situation, conventional loan providers will apply the proceeds to pay off the loan without any allocation.

Riba-free
The Declining Balance Co-ownership Program does not involve payment of interest between a debtor and creditor. It is 100% riba-free.

No pre-payment penalty
There is no pre-payment penalty required by Guidance Residential when a homebuyer wants to pay ahead of the agreed schedule.

Capped late payment fees
In the event that late payments occur, Guidance Residential will only charge a capped fee equaling $50 or less, exclusively meant to cover the expenses involved in administering a late payment, rather than the conventional 5% penalty.

Non-recourse commitment
In the event of payment default, Guidance Residential does not pursue any of the homebuyer's other assets.

Q. How does this program work?

Guidance Residential and the homebuyer engage in a co-ownership venture where each owns a percentage of the home, in proportion to the equity they each contributed. Homebuyers are required to make monthly payments to Guidance Residential over a predetermined period of time in order to completely buy out Guidance Residential's shares in the property, and own the property outright. The monthly payment consists of two portions; (1) an amount for the acquisition of a portion of Guidance Residential's ownership interest (Acquisition Payment) and (2) the other for the exclusive use of the entire property that includes Guidance's share (Profit Payment). The Acquisition Payment serves in buying Guidance Residential's shares of ownership over the predetermined period of time and the Profit Payment is akin to rent or use of property of another.

For instance, if you are looking to buy a $300,000 home and you have $30,000 of your own money to contribute towards the purchase of the home, Guidance will contribute the remaining $270,000 in funds to purchase the home together. Guidance will purchase the property along with you and we will form a co-ownership agreement stating that we both own the property together. Then, we set up a 15, 20, or 30-year contract in which you make a monthly payment to Guidance Residential. A portion of that payment will go towards buying out Guidance Residential's ownership. The other portion of the monthly payment is for the exclusive use of the property. The utilization fee that we charge you will decrease every month as our ownership in the property decreases and the portion that goes to buying Guidance's ownership will increase by that same amount so that the monthly payment stays constant.

In accordance with the terms of the co-ownership agreement, you can sell the property at any time and any profit from that sale will be 100% yours. For instance, if after 5 years, you sell this property for $350,000, that extra $50,000 will be all yours.

Q. How is it different from regular loans?

Our Shariah-compliant home financing program does not constitute a debtor and creditor loan arrangement. Lending money to profit from any commercial or investment activity including the financing of real estate is not an acceptable method for commerce, according to Islam. Therefore, our home financing program has been modeled on the Islamic financing concept known as "Musharakah Mutanaqisa" or "Diminishing Partnership." The relationship between Guidance Residential and the homebuyer is that of co-owners in a property and not that of a borrower-lender. The initial financing provided by Guidance Residential is applied to acquire an interest in the property and not to provide a loan.

Watch our FAQ video: What is the difference between Guidance's Shariah-compliant home financing program and a mortgage loan?

Q. What makes your program Halal?

The unique thing about Guidance Residential is that we brought together seven of the leading scholars in the world on Islamic finance. These scholars are all widely known for their expertise in Islamic legal jurisprudence in financial transactions and they come from across the globe. The Scholars help us offer a product that is both Shariah-complaint and work within each individual states' home protection laws. Our Shariah Supervisory Board has authored numerous fatwas on various aspects including one on the overall structure.

Check out video library to find more about the program.

Q. How can I know if I am eligible to apply?

You can get started by doing our online Pre-Qualification. It is a simple process to start your home financing journey. No credit check is required, and it only takes 10 minutes. Visit this link to get Pre-Qualified.

Q. What types of refinancing do you offer?

Currently, Guidance Residential provides Shariah-compliant home refinancing for both primary properties (homes which are occupied by the owner) and non-owner occupied properties (also known as investment properties).

Visit this page to see details of the financing options we offer

Q. How can I get started?

You can get started by completing our online Pre-Qualification form. It is a simple process that takes less 10 minutes to complete. You will need to provide us with general information that will be used to provide you with the best estimate and Pre-Qualification status.

Q. How long does it take from application to closing?

The timeline varies case by case. On average, it takes 45 days to close a file from the day the application is taken. Timeline can be shortened to 30 days, dependent upon third party vendors' timeliness, customer's responsiveness and credit profile.

Q. What is pre-qualification?

Pre-Qualification is the process that provides you estimates on your affordability based on the information you provide. It does not require a credit check and takes less than 10 minutes to complete.

Q. What happens after I get Pre-Qualified?

After you complete the Pre-Qualification form, you will be assigned an expert Account Executive that will guide you through the home financing process. He or she will be able to answer any questions you may have to help get you pre-approved and receive conditional approval for your home purchase or to help you complete a refinance.

Q. How does the application process work?

Once you Pre-Qualify with Guidance, your licensed Account Executive will follow up with you periodically to see if your purchase offer has been accepted. You can also contact your Account Executive if your offer is accepted prior to hearing from him or her. In either situation, your Account Executive will begin the finance application process for you once your offer is accepted. This typically takes 10 minutes over the phone. During the finance application process, you will need to provide a number of documents and signed paperwork before you can be approved for financing. This process takes an average of 45 days, but can be reduced (dependent upon third party vendors' timeliness, your credit profile and responsiveness).

Please view the Application Checklist page to know what documents will be needed to complete the application process.

Q. What documentations are required to apply for financing?

Visit the Application Checklist page to view the documents needed to complete the application process. Please note documentation requirements may vary based on individual situation.

Q. How does the closing process work?
Arrange for Closing Costs
  • Your Account Executive will make sure that you are provided with a closing cost estimate, which is the amount you will need to bring to the closing in the form of a cashier's check or wire transfer. Avoid making large purchases and taking on new debt - such as furniture, home appliances or vehicle - so that you do not delay or stop the closing process.
Sign the Closing Paperwork, Get the Keys and Move In!
  • It's the big day! The closing itself and signing of paperwork typically takes 1-2 hours. Then enjoy your new home and find comfort in knowing that you became a homeowner without compromising your faith.

Visit the Refinance Process page to learn more.

Q. How do I connect with an Account Executive?

After you complete Guidance's online Pre-Qualification, you will be assigned a licensed Account Executive who will verify the information you provided and assist you with the pre-approval and conditional approval process. Your Account Executive will follow up with you shortly after you Pre-Qualify; however, you will receive contact information if you wish to connect sooner.