How to Pre-Qualify for a Shariah-Compliant Loan

Shopping for a new home or investment property? Before you start making offers on homes, you’ll want to pre-qualify your Islamic financing. And if you’re looking for a Shariah compliant loan, there are some details you’ll want to pay attention to. The ethical guidelines that a Sharia compliant loan adheres to change parts of the process. By taking the time to qualify ahead of applying, you can speed up approval and set yourself up for success. Prepare ahead of time, connect the dots, and learn how to qualify for a Sharia compliant loan below.



Start with Your Financial Documentation

The process for qualifying for a Shariah loan starts with getting your financial documents organized. Before meeting with a financial institution, gather proof of your current financial picture. Bring your last few pay stubs, your two most recent tax returns, and statements from any bank and investment accounts you own. Be sure to list out all liabilities you currently have as well. The better your paperwork is organized, the more professionalism you’ll project. Staying prepared can help speed up the process and set you up for success when qualifying for a Sharia loan.

Check Your Credit and Stay on Top of It

While interest is not factored into your payments with a Shariah compliant loan, lenders still care about your credit. Your credit history shows your track record of making payments and meeting financial obligations. Request a copy of your credit report, review it for any errors, and dispute them as quickly as possible. Work to pay your bills on time, and keep your credit card balances low. Properly maintaining or building your credit will help you qualify for a Sharia loan and show lenders you’re a low-risk customer.

Calculate Your Down Payment and Affordability

Since most Shariah compliant loan structures require larger down payments than traditional loans, determine what you can put down before you start your search. Financial institutions typically ask for at least 20% down. Not only will this show you come to the table with built-in equity, but it also lowers the risk for you and the bank. Evaluate your monthly income and expenses to determine what you can comfortably afford. From there, calculate what you can pay each month. Establishing these numbers now can set realistic expectations as you start house hunting. It also allows you to browse efficiently and ensures you won’t become house poor.

Understand Your Financing Options

Each Shariah loan is set up slightly differently, which is why it’s important to do your research ahead of time. The two most common types are Murabaha and Diminishing Musharakah. With Murabaha, the financing company will purchase the property for you and then sell it to you for a profit. Diminishing Musharakah allows you and the bank to own the property together, paying the lender back over time. Researching your options for Sharia home loans not only allows you to choose what’s best for your situation, but it can help you ask the right questions about Islamic loans and Islamic financing.

Confirm Your Property is Shariah-Compliant

As with most loans, not every property will qualify for financing. Since a Shariah home loan is asset-based, the use of the property is taken into consideration. Make sure that the property you are purchasing will be used to conduct a halal business. Financing will not be approved if the property is going to be used for businesses that are forbidden by Sharia law. These include, but are not limited to, alcohol-related businesses, nightclubs, casinos, and more. By confirming your intended property qualifies ahead of time, you can avoid delays in the process.

Finalize Your Path to Ethical Financing

Qualifying for a Shariah home loan doesn’t have to be difficult. As long as you know what to expect and stay organized, you can simplify the process. Working to provide qualifying information for each section will prove you’re a capable candidate when applying for the loan. So take time to understand what materials you need, and cross them off your list as you go. Simplify your journey to homeownership and learn how to qualify for a Sharia loan with the right support.

Looking for tips on qualifying for a Shariah compliant loan? Devon Islamic Finance understands this process inside and out, and they take pride in providing clients with transparent services and Islamic lending options that fit their needs. With years of experience in the industry, they can help guide borrowers through each step of the process. So whether you’re a first-time homebuyer or looking to expand your portfolio, contact Devon Islamic Finance today and let their experts help you move forward with confidence.

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