Posted by: islamicfinancingnews | January 2, 2013

An adequate down payment can help obtain proper Islamic mortgages

islam21 Even though Islamic mortgages vary in some respects from mortgage services offered by other lenders, there are some common elements they share and one fundamental similarity is the importance of a satisfactory down payment towards the purchase of your home.

Providing a down payment of 20% or more of the purchase price is the optimum choice here because it will not only help you to qualify for a conventional mortgage, but will reduce the amount of the monthly principal and interest payment, as well as the total amount of interest you will pay over the term of the mortgage. A down payment less than 20% is termed a high ratio mortgage and will require mortgage insurance since the loan to value ratio is higher than 80% of the home’s value.

When you are considering applying for Islamic finance to purchase a home, you should be aware the prerequisites include earning enough income to be able to afford the monthly payment, having reasonable credit and sufficient money in current accounts to satisfy the required on-account payment or traditional down payment, which is usually in the ten to twenty percent range or higher.

Other important considerations to obtain pre-approval for proper Islamic loans free from Riba include having ample funds to cover closing costs and adequate funds in reserve to meet financial difficulties that may arise.


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