Conventional and Islamic finance of home purchase : mortgage process

Fatawa Question

As Salam O Alaykum Brother Monzer, I am in dire need of your help regarding my first home purchase and the mortgage process ? based on my research (please see the references below) and what I have heard from people, I am very confused and need guidance with your export knowledge to make a Halal decision in my life. Scenario : • I have bought a new (to be build) home from a Centex builder. The home will be ready end of this month • Builder is only paying $ 7500 closing cost if I go with CTX mortgage, which is their mortgage company • CTX mortgage is giving me 4.625 % interest rate for 30 yrs. loan • I only have 10 % down payment to make. I can't afford more than this. Builder paying $ 7500 helps me significantly to buy the loan. Question : • According to Islamic law, am I permissible to buy a home from the builder and pay regular interest ? (I heard from people that if you go with builder or bank who owns the property, then it is ok ? However, according to the references below, it sounds like it is not allowed) options • I have contacted Guidance and filed an application with them. • They require at least 10 % down payment. In my case they are willingly to allow 5 % down • I will not have $ 7500 towards closing from builder, I have to pay out of pocket. • The profit ratio (interest rate) will be higher than 5 % with Guidance. • The monthly payment will be higher with Guidance. If I go with Guidance. • I will have to stretch significantly to go with Guidance. This will also result in almost emptying my bank account to start with them. I will not have backup money, unless they allow me to pay 5 % down. • However, I have a good stable job and In Sha Allah will be able to successfully make monthly payment and save more. • My father recently had heart attack and I was planning to save money for his medical expenses. • Early next year, my brother and sister’s marriage ceremonies are happening, I need to save money for that as well. • We are Masha Allah expecting a new addition to our family as well this year • After buying the home, there are bunch of new expenses that will occur Please advise me in the above situation what should I do and what is permissible in Islam according to Quran and Sunnah. Another quick question I would like to ask for my better understanding. Would it be allowed according to Shari’ah, if I ask builder to make the following change in the contract ? Amend the contact to buy and to make payments to parent company, i. e., Context, instead of doing purchase agreement with Centex Homes and lender agreement with CTX mortgage ? Centex is a parent company of both of these and they are called its divisions or affiliated companies. If they agree to make above changes, would I still need them to amend the contract on the installment prices instead of cash price and interest ? Jazak Allah Khairan for your help and guidance in this regards. Regards Kashir

Fatwa

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Publication Date

2009-05-20

Main Subjects

Financial and Accounting Sciences
Islamic Studies

Topics

• Islamic jurisprudence
• Subprime mortgage

No. of Pages

3

Data Type

Fatawa

Language

English

Record ID

BIM-734898

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