Islamic Mortgages for First Time Buyers, Part 4: Fatwa

    If you’ve decided to look into Islamic financing for your home, you likely want assurance of two things: 1. That it is different from a conventional mortgage and 2. That it is really halal. Previous blogs in this series have addressed the first part of that question. In this blog, we will examine how you can tell that Islamic home financing is truly shariah-compliant.

    Fatwas in Islamic Mortgages

    First, it is important to understand the terms.

    What is a fatwa?

    Fatwas are often misunderstood in the United States. A fatwa is simply a ruling on a point in Islamic law, given by a qualified legal scholar, or mufti. Fatwas can clarify the application of timeless Islamic principles in a particular modern setting. Much like Western legal rulings, they can be sought on general concepts or very specific applications. 

    Ensuring a Home Financing Program is Shariah Compliant

    It is important for homebuyers seeking Islamic financing to feel assured that their financing is in accordance with Islamic principles. Fatwas from recognized scholars and experts can provide that assurance.

    Guidance Residential, the #1 U.S. Islamic home finance provider, displays the legal rulings on its services and products on its website. There you can find a series of fatwas on the legality of this authentic co-ownership model of Islamic home financing, as well as various more specific aspects of this service. 

    The fatwas were issued by some of the world’s top scholars in Islamic financial law, both in the United States and worldwide. Seven of those scholars serve on an independent shariah board that Guidance Residential consults to ensure that its services remain halal.

    An introductory letter by one of the board members explains their purpose:


    For myself, and on behalf of the other members of the independent Shariah Supervisory Board of Guidance Financial Group, I wish you peace, prosperity, and blessings in this world and the next.

    Muslims across North America have experienced difficulties in managing their money matters in accordance with Shariah. In the absence of viable Islamic alternatives, most Muslims have opted, out of necessity, to use conventional financial products and services for their short and long-term financial needs. Even so, many Muslims, sensitive to the clear prohibitions against riba, have attempted to limit their exposure to interest-based finance.

    Scholars, like those of us who serve on the Guidance Shariah Supervisory Board, have worked hard in recent decades to revive the traditional role of Shariah in finance. Around the world, great strides forward are being made. Shariah-compliant businesses and financial service providers are now operating in almost every Muslim majority country, and in many countries where Muslims are a minority as well.

    The intention of our Shariah Supervisory Board is to ensure that useful, competitive, and truly Shariah-compliant products are developed, delivered, and maintained by Guidance Financial Group, so that you may rest assured that you are transacting in ways that comply with the religious and moral teachings of Islam. Toward this end, our Board performs regular audits of the company and its business.

    It has been the pleasure of our Shariah Board to work with Guidance Financial Group, and with some of the leading experts in U.S. finance, in order to devise ways and means for you to purchase a home in a manner that is free of riba. We also work with Guidance to enable you to invest in your family’s future in ways that accord with Islamic legal and moral principles.

    In closing, I wish you a pleasant experience in all of your transactions with Guidance.

    Yusuf Talal DeLorenzo

    On behalf of the Shariah Supervisory Board

    Shariah Compliance Audit

    When Guidance Residential was founded, the company spent three years on research before opening its doors, in order to develop a sound, authentic model of home finance that would comply with Islamic principles and work well in the United States. Since then, the company has continued to maintain its focus on ensuring that all services continue to comply with principles of Islamic financial law. This assurance is provided through annual audits by an independent Shariah Supervisory Board. The board is composed of seven scholars headed by chairman Justice Muhammad Taqi Usmani, who also serves as chairman of the Shariah Board for the International Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).

    Each year, the board appoints an auditor with expertise both in shariah law as well as U.S. finance to examine the company’s practices and products and to report back to the board. 

    The audit examines the following:

    • The structure of the services
    • The products
    • The policies
    • Employees’ practices and transactions 

    The audit is intended to catch any errors and look for opportunities for continued improvement.

    After completing the audit, the auditor reports back to the Shariah Supervisory Board, which then examines and ratifies it and presents it to the board of Guidance Residential to act upon. The audit reports are available for the public and for regulators to view.

    An annual audit is standard practice for any company. Guidance Residential’s audit goes a big step beyond, in order to provide certainty on the religious element as well as general financial practices. The result is to ensure continued compliance with Islamic legal principles and best practices. The audit provides transparency for home buyers, investors, and regulators alike. 

    What Does a Shariah Compliance Audit Verify? 

    The audit verifies the following:

    • That a shariah-compliant structure is in place
    • That policy based on Islamic financial principles are updated and implemented 
    • That employees’ practices have complied with guidelines
    • That all products offered to consumers have been approved by the Shariah Supervisory Board and that a fatwa has been obtained

    Get Started with a Shariah Compliant Islamic Mortgage

    If it is important to you to live your life consistent with your values, it may come as a relief that a great alternative to a traditional mortgage is now available for you to use in financing your home. Not only does Guidance Residential’s Co-Ownership Model of home finance comply with Islamic principles, but it also offers competitive rates that can appeal to any home buyer. It’s never been easier for American Muslims to buy a home!

    Here are some steps you can take:

    • If you’re in the early stages of your home-buying journey and you’re looking for initial information, you can use calculators on Guidance’s website to get an idea of costs and the financing you might qualify for. 
    • Or in just 10 minutes, you can get Pre-Qualified for a better idea of what to expect.
    • If you’re ready to take the next step, you can go ahead and get Pre-Approved so you can begin meeting with a Realtor and looking for your new home!

    Our experienced Account Executives are here to help. Contact us, and we’ll be glad to help you along your home ownership journey!

    Your Guidance Residential Account Executive is here to help with any questions. Looking to refinance or purchase? Rates have dropped to historic lows! Have a friend or family member who is looking for a home? Call 1.866.Guidance, or start an application today!