Achieve Your New Year’s Resolution of Buying a Home
A new year’s resolution is an exciting way to start a year, especially when the resolution is to buy your first home. But to be successful, you need a plan.
To help you stick to your New Year resolution, here are a few ideas.
First Steps for Homebuyers
The first step most homebuyers take is to think about what you’re looking for. This is important, but it’s just as important to get your finances in order.
Prepare Your Finances
Before you begin house hunting, it’s important to have an idea of the financial requirements and your financial situation.
Look at Your Credit
As soon as you start thinking of buying a home, you should check your credit score, get a copy of your credit report, and gain an understanding of what your credit history looks like.
Whether you choose a traditional mortgage or halal home financing, your financier will need to review key factors such as credit history, income, and savings, though specific eligibility criteria may vary by provider.
If your credit needs work, you will want to start improving it early. Pay bills on time, and don’t open or close accounts at this time.
Get an Idea of How Much You Can Afford
Make use of an online mortgage calculator or get pre-qualified to gain an idea of how much financing you would qualify for and get a clear understanding of the numbers involved. Consider the down payment plus closing costs, as well as what a monthly mortgage payment might look like. Also remember to factor in ongoing costs such as property taxes when planning your budget.
This will give you an idea of how much home you can afford and what you are saving money for. Once you have the financial picture in place, you’re halfway through with your resolution.
Narrow Your Home Search
When considering buying a home, evaluate your lifestyle, needs, and goals. The type of home you choose will play a significant role in shaping your daily life and financial responsibilities.
Traditional Single-Family Homes
A traditional single-family home offers independence and space. This type of home is ideal for individuals or families who value privacy and enjoy having a yard or outdoor space. You have complete control over the property, allowing you to personalize and modify it as you see fit.
However, with this freedom comes the responsibility of maintaining the home and its surroundings. Tasks such as landscaping, exterior repairs, and snow removal will fall entirely on you.
If you have the time and resources to manage these responsibilities and need more room for a growing family or hobbies, a single-family home may be the perfect choice.
Townhouses
Townhouses strike a balance between single-family homes and condos. They typically share walls with neighboring units but often come with small yards or patios. This option is great for those who want a bit more space than a condo offers but don’t want the full responsibility of maintaining a large property.
Homeowners’ associations (HOAs) may handle exterior maintenance, at least in shared public spaces, which can save you time and effort.
Townhouses are often located in planned communities, offering amenities like pools or parks, making them an attractive option for families or individuals who enjoy a sense of community without the burden of extensive upkeep.
Condos
Condos are an excellent choice for individuals with busy schedules or those who prioritize convenience and low-maintenance living.
In a condo, the homeowners’ association typically handles all exterior maintenance, including landscaping, roof repairs, and even some utilities. This makes condos particularly appealing to professionals, retirees, or anyone who travels frequently.
Condos often come with shared amenities such as gyms, pools, and social spaces, providing added value and convenience. However, it’s important to consider HOA fees and rules, which can vary widely.
Choosing the Right Option
Your choice should align with your own homeownership goals, expectations, lifestyle, and budget.
If you envision hosting backyard barbecues or need room for pets and children to play, a single-family home might be your best bet. If you’re looking for a blend of space and convenience, a townhouse could be the ideal middle ground. For those who prioritize a lock-and-leave lifestyle with minimal upkeep, a condo offers unmatched convenience.
Take the time to reflect on your current and future needs to make a decision that suits you best.
Make a Timeline
Now that you’re starting to get a picture of your finances and the type of home you’re looking for, it’s helpful to set a clear goal for when you’d like to move into your new home. This target date will help you work backward and allocate time for each phase of the homebuying process.
Buying a home is a significant milestone, and creating a realistic timeline is essential to make the process manageable and stress-free. By breaking the home purchase journey into smaller, actionable steps, you’ll stay organized and motivated from start to finish.
Here’s an example of what a typical homebuying timeline might look like:
6 Months Before Purchase
- Assess Your Finances: Check your credit score, reduce debts, and save for a down payment.
- Research the Market: Explore neighborhoods, schools, and amenities that fit your lifestyle.
- Get Pre-Approved: Secure pre-approval for a mortgage.
3 Months Before Purchase
- Find a Real Estate Agent: Partner with a trusted professional who knows the local market.
- Start House Hunting: Attend open houses and refine your list of must-haves and deal-breakers.
- Organize Your Documents: Gather essential paperwork like tax returns, pay stubs, and bank statements for the mortgage application.
1-3 Months Before Purchase
- Make Offers: Once you find the right home, submit competitive offers and negotiate terms.
- Schedule Inspections: Hire professionals to conduct an inspection and home appraisal and ensure that the property meets your expectations.
- Finalize Your Mortgage: Work with your financier to lock in your rate and complete the underwriting process.
Final Weeks Before Closing
- Conduct a Final Walkthrough: Ensure the property is in the agreed-upon condition as you head into the closing process.
- Prepare for Closing Costs: Budget for fees like title insurance, appraisal, and attorney services.
- Close on Your Home: Sign the paperwork, get the keys, and celebrate becoming a homeowner!
By following a timeline, you can tackle each step with intent and confidence.
Choose Your Financing
When it comes to home financing, there are several types of mortgages available, each with its own structure and set of rules.
Conventional mortgages, also known as traditional mortgages, are the most common in the market. These loans are typically offered by banks and involve interest payments over the life of the loan.
For faith-conscious Muslims, a traditional mortgage loan is not a good financing option because riba, or interest, is prohibited in the Quran. Fortunately, riba-free Islamic finance options are now available.
An Alternative to Mortgage Loans
Islamic mortgages provide an alternative that avoids the use of interest altogether. Instead, they use innovative structures such as co-ownership to facilitate the purchase and financing of a home.
Halal mortgage structures are carefully designed to ensure compliance with Islamic law, focusing on riba avoidance, risk-sharing, and asset-backed financing. They emphasize transparency, ensuring that the process is fair and in line with Islamic finance principles. They are inherently more equitable as well.
Shariah compliance is a key factor in halal mortgage products. They should be reviewed and approved by a Shariah board, a group of qualified Muslim jurists who ensure that the financing structure adheres to Islamic guidelines. This oversight guarantees that the products remain riba-free and uphold the ethical standards required by Islamic law.
Three Models of Islamic Home Financing
Several models of Islamic financing exist, each with different payment structures. You can compare Islamic finance to conventional loans and conventional banks to understand the differences in structure and cost. Understanding the key principles of Islamic home financing will help you make informed decisions throughout the process.
There are three main models of Islamic home finance in the West.
Murabaha
In a Murabaha contract, the financier buys the home on behalf of a homebuyer and then sells it to them at a marked-up price.
This type of contract is less ideal because it does not incorporate the important Islamic financial principle that the parties should share the risk.
Ijarah
In an Ijarah model, the financier buys the property and leases it to the homebuyer. A portion of each monthly payment will then go toward purchasing the home.
Like Murabaha, however, this also has a major drawback: The homebuyer does not gain full ownership rights until the end of the contract, typically 30 years.
Musharaka
Musharaka models take a partnership approach in which the financier and the homebuyer co-own the property. The two parties buy the home together, and then the homebuyer buys out the financier’s share while paying a fee each month for the full use of the entire property.
This model is preferred in the United States. It complies with Islamic financial principles such as avoiding riba and sharing the risk, and the homeowner gets full ownership rights from the beginning.
Guidance Residential’s Musharaka Model
Guidance Residential is a leader in Islamic home financing in the United States, offering an authentic musharaka model of financing called the Declining Balance Co-Ownership Program. In this structure, the Islamic finance company and the homebuyer become co-owners of the property. The homebuyer makes monthly payments to gradually buy out the company’s share, moving step by step toward full ownership.
The structure is designed to be transparent and fair, with no hidden fees or interest charges.
Beware of Bank-Based “Islamic Financing” Options
Not all Islamic mortgages are created equal, so make sure the one you choose is not funded by a riba-centered bank. Traditional banks that offer so-called “Islamic mortgages” are unable to comply with some important Islamic finance principles such as the requirement for transactions to be asset-backed. And they are funded by riba, or interest.
Benefits of Islamic Home Financing
Guidance Residentials Islamic home financing also offers additional benefits compared to a mortgage loan, such as the absence of prepayment penalties and sharing of risk. By choosing a halal mortgage, Muslim homebuyers can enjoy peace of mind, knowing that their home financing is both ethical and compliant with their faith.
Find a Great Partner: Your Real Estate Agent
Buying a home can be an exciting yet overwhelming journey, especially when you’re navigating through piles of paperwork, document reviews, and inspections. This is where good professionals can make all the difference.
Partnering with a skilled and reputable real estate agent means you’ll have someone in your corner who understands the market and can advocate for your best interests. They can spot potential red flags during inspections, guide you through the fine print in contracts, and help you secure the best possible deal.
If you don’t have a real estate agent yet, you can find a trusted agent through Guidance Home Services. These professionals are equipped with industry knowledge and a commitment to making your home-buying journey as easy as possible.
Balance Facts and Feelings
One more important note: When you’re looking for the right home, it’s essential to strike the right balance between facts and feelings. While emotions often guide us toward places that feel right, making an informed decision based on tangible factors ensures that your dream home is a smart investment.
Practical Factors
Start your home search by analyzing the home’s structure and location: the home’s location, size, price, and condition.
Does the neighborhood offer the amenities your family needs, such as good schools, parks, or shopping centers? Is the commute manageable?
Consider the home’s structural integrity, age, and potential maintenance costs. A professional home inspection can uncover hidden issues that might not be visible during a casual visit.
Financial Value
Additionally, consider the home’s value. Even if you’re planning to stay for the long term, understanding the potential for appreciation can safeguard your investment. Research similar homes in the area to compare pricing and value, and don’t hesitate to ask your real estate agent for detailed data on the local housing market.
Intangible Factors
Once you’ve armed yourself with facts, let your emotions come into play. A home isn’t just a financial asset, it’s a place where memories are made. Take a stroll through the neighborhood and imagine your daily life there. Does it feel welcoming? Does the home inspire a sense of comfort and belonging?
By blending the heart’s pull with the mind’s logic, you’ll find a home that not only feels right but also meets your practical needs. After all, they say, “Home is where the heart is” … but it’s also where the facts add up.
Enjoy the Journey
As you head toward homeownership, enjoy the steps along the way. Keep a task list that you review daily or weekly to track your progress as you move through the process at your own pace. Celebrate small wins such as getting pre-approved or finding a great real estate agent to keep your momentum going.
Remember, flexibility is key. Unexpected delays or challenges can arise, but having a timeline will help you adapt and to stay focused and on track. Day by day, you’ll get closer to owning your dream home until the day you get your keys.
Ready to Get Started?
The team at Guidance Residential is here for you every step of your homebuying journey.
Guidance Residential remains the #1 U.S. Islamic home financing provider. Over the past 20 years, we have assisted more than 40,000 families. Learn more 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.
Originally published in January 2015, updated January 2026.
