The Halal Revival:
A Talk with Shaykh Yusuf DeLorenzo
Shaykh Yusuf DeLorenzo, a member of Guidance Residential’s independent Shariah Supervisory Board, spoke in April at Masjid DarusSalam in Illinois.
He talked about a global revival of Muslims re-establishing the institutions lost during Colonialism – including Islamic banking and halal home financing.
And this revival begins with each of us.
The History
Muslims historically had a rich network of institutions for centuries, Shaykh DeLorenzo said. This included Islamic-based financial systems as well as courts that upheld their principles.
Historically, he said, Muslims were experts in finance and business. The Prophet (SAW) and his Sahaba (RA) were traders, businesspeople, and very successful ones at that for centuries.
If a trader in Egypt sent a ship across the ocean to Sri Lanka, he said, the contracts were perfectly understandable to both parties. That’s because their systems were based on the same principles. The Islamic world had a whole network across the Pacific, the Indian Ocean, the Pacific, into the Pacific, the Philippines, all around the world.
Until it was disrupted by Colonialism.
Before World War II, Shaykh DeLorenzo said, most of the Muslim world came to be under the control of Colonial powers like France, Germany, Italy, and England. During that period of time, Muslims lost control of their own institutions. Those institutions included judicial systems, educational systems, and financial systems.
The Colonial powers came along with their banks and their banking system and offered easy money. The communities they ruled had little choice but to take part in their system — or face going out of business.
Their financial system took root, and for centuries, it dominated. It inflated the economy with money based on things that have no intrinsic value. The concept of charity – allowing people in need to borrow money without expecting any gain – was replaced with lending and charging interest. The Islamic systems never turned charity into business, but the Western world did. Everything is business, Shaykh DeLorenzo said — the more the better.
Even the meaning of money itself is different. Money, from an Islamic perspective, is a marker representing something that has value. It has no intrinsic value at all. But in the Western economic system, it is seen as having great value. And more could just be printed. So leaders pumped the economy full of money with no value behind it whatsoever, and paid themselves high rewards.
Now with virtual trading taking place in capital markets all around the world, 24/7, they’re just pumping the whole world’s economy with nothingness. But the Muslim community, Sh. DeLorenzo said, needs to believe that that’s actually worth something.
The Revival
After the Second World War, when the Colonial powers retreated, Muslims found themselves with the ability to re-establish those institutions.
They established educational institutions, and they strengthened the ones that had remained in place. In the judiciary sphere, they established Muslim courts. And they began rebuilding financial institutions as well.
Now there’s a revival across the globe of faith – and people are re-establishing the institutions that they had lost.
These institutions include halal banking and financing. And the Islamic alternatives have proliferated not only in the Muslim world but in the United States as well.
Institutions to Turn To
For years, Muslims in the West had few institutions to turn to. There were not many mosques, very few places to learn and study Islam, and few alternatives to the western conventional banks. Many Muslim families continued to pay rent for decades rather than get a standard mortgage and pay interest.
That has changed.
Now, Muslims can find halal banking and other financial alternatives including Islamic home financing or a halal mortgage.
Guidance Residential is part of that revival – a groundbreaking authentic Islamic home finance provider offering sharia compliant mortgages, established with top scholars and continuing to grow more than 20 years later.
What Is Halal Home Financing?
Those who are new to the concept might wonder, what is Islamic home financing, what makes a mortgage halal, and how do Islamic mortgages work?
For Muslims seeking to buy a home in a way that aligns with their faith, traditional mortgage loans pose a challenge due to the necessity of paying interest (riba), which is prohibited under the principles of Islamic law. Guidance Residential offers an alternative to traditional mortgages: a Shariah-compliant home financing model based on co-ownership, not a loan.
A Pioneer in Halal Mortgage: Islamic Home Financing
Guidance Residential was founded in 2002 with a clear mission: to provide American Muslims with a faith-compliant path to homeownership.
Recognizing the lack of halal home finance options in the United States, the founders worked with experts in Islamic finance as well as law forms to develop an authentic model that aligned with Islamic principles while meeting American regulatory standards.
Since then, Guidance has grown to become the nation’s largest provider of Islamic home financing.
The Diminishing Musharakah Model
Guidance Residential is a home financing company that uses a structure called Diminishing Musharakah, or Declining Partnership. Here’s how it works:
- Co-Ownership AgreementInstead of lending you money at interest like traditional mortgage lenders, the financier purchases the property along with you as co-owners. You and Guidance both contribute to the purchase price — your down payment plus their investment. This creates a shared ownership of the property owned by both parties.
- Full Ownership RightsYou live in the home with full ownership rights, making monthly payments to increase your share of the property. In an Islamic mortgage, the bank buys the property on behalf of the borrower. Your payments include a monthly fee in order to use the bank’s share they own. This profit rate is competitive with interest rates, but it is not interest. It is based on an entirely different foundation of ownership rather than lending.
- Gradual BuyoutEach month, part of your payment goes toward buying out Guidance’s ownership share of the home. Once the buyer has fully paid off Guidance’s stake, they achieve the status of sole owner. Over time, your ownership percentage increases while the company’s decreases. Eventually, you own the home fully.
- Shariah SupervisionIs it halal? Absolutely. This model of sharia compliant financing has been reviewed and approved by a panel of internationally recognized Islamic scholars. This ensures the process stays compliant with Islamic finance principles.
How to get a halal mortgage works similarly from the home buyer’s perspective to a traditional mortgage, but the foundation is completely different. It is based on sound principles of Islamic finance.
The Benefits
Halal financing offers many benefits over a conventional mortgage.
1. Shariah Compliance
The most important benefit is that Guidance Residential’s model of is completely riba-free (interest-free) and adheres to Islamic principles. This gives Muslim homeowners peace of mind that their financing aligns with their faith.
2. Transparent and Ethical Structure
Unlike traditional mortgages that are interest-based and often contain hidden fees, Guidance Residential offers a clear, ethical structure where terms are transparent and profits are shared based on real ownership, not debt.
3. No Prepayment Penalties
Guidance Residential allows you to buy out your share of the home faster without any penalties. If your financial situation improves, you can accelerate your path to full ownership at your own pace.
4. Shared Risk and Responsibility
Because Guidance co-owns the property with you, the model reflects shared risk—a core principle in sharia law. This partnership approach aligns the interests of both parties.
5. Competitive Pricing
Guidance Residential is able to offer halal mortgages that are priced competitively with conventional mortgage lenders in terms of both monthly payments and total cost over time. Muslim families don’t have to pay a higher price to stay compliant with their values.
6. Established, Trusted Provider
Founded in 2002, Guidance Residential is the #1 Islamic home financier in the United States. With over two decades of experience and tens of thousands of clients served, they offer credibility, stability, and a deep understanding of both Islamic finance and the U.S. housing market.
Why It Matters
This method allows Muslim homebuyers to avoid traditional interest based lending and other practices that violate Islamic principles, while still achieving the goal of homeownership.
It’s not just about financial flexibility — it’s about upholding faith-based values in everyday life.
It Begins With Us
At his talk, Shaykh Yusuf DeLoreno encouraged Muslims to take pride in their heritage:
“Be proud. Be proud of the fact that you are Muslim. Allah SWT has chosen you, your families, to live the life of Muslimeen …. It’s a great privilege.
“The most important thing is that we need for this ummah in these circumstances where we are a tiny part of a community awash in kufr, that we be proud of who we are, and that we not allow anyone else to tell us who we are and what we mean to this world.
“We may look at the numbers. We may look at our influence, let’s say, on a political scale, our influence here, there in the dunya, it may be minuscule … but our Iman, if it grows stronger, if our pride in our identity is always with us, then we can, we can make a change, not only for ourselves, but for society as a whole. In tiny, tiny ways, small increments.
“If you’re a physician, if you are a housekeeper, let the people know those with whom you interact, that Mashallah first and foremost, you’re a Muslim.
“Tajdeed means making something new or renewing something. In our case, Tajdeed really has to do with making ourselves relevant to the society in which we live, in whatever sphere we happen to work in or be a part of, and everyone can play a role in that, no matter how tiny.
“Allah SWT has granted us this gift, and we need to be proud about who we are and what we do with it, with this gift. … You can at least let people know that you’re a believer, that you have that you live by a code that directs your actions and your thoughts. That’s the least that you can do. But that’s a big deal, in this society, in any society, really, to establish the fact that you are a believer and be proud of it.
“Tajdeed really, to me, means relevance. If we can make ourselves relevant to the society in which we live, then we’re renewing it. … To make ourselves and our deen relevant to this society begins with establishing our identity.
“The important thing is that you establish who you are in your deeds and in your words. That’s the beginning for any one of us toward tajdeed, making ourselves relevant to our society in the ways that we are capable of doing so.
“Not every one of us is a scholar, but everyone has iman (faith), and those who have iman have the greatest gift of all. We should celebrate it and spread the word by living our lives in accordance with the sunnah of the Prophet (SAW).”
Ready to Buy a Home the Islamic Way?
A home purchase is one of the most important decisions you will make. The team at Guidance Residential is here for you, from the first step of pre-qualification or pre-approval, on through to finding the right real estate professional for you and your family — or refinancing a home you already own. We invite you to explore the home buying process with Guidance Residential today. You can also instantly calculate an estimate specific to your personal situation with our finance calculators online.
Guidance Residential remains the #1 U.S. Islamic home financing provider, with more than 40,000 families assisted over more than 20 years. Learn more about our co-ownership model of Islamic home financing, and get started on your home finance journey today.
*Your Guidance Residential Account Executive is here to help with any questions. Looking to refinance or purchase?*Have a friend or family member who is looking for a home? Call 1.866.Guidance, or start an application today.
