Posted by: islamicfinancingnews | August 8, 2013

Understanding some Islamic finance requirements

islam-31 There are certain financial ingredients you need to put in place when you want to qualify for Sharia compliant Islamic loans to purchase your first home or next home. In addition to having reasonable credit and enough money to afford monthly payments, a down payment in the ten to twenty percent range of the purchase price is another essential factor the lender needs to determine your ability and willingness to repay the loan.

There are different ways to confirm the amount and source of your down payment.

  • Bank statements for the past three months will verify to the lender the down payment is coming from your own savings.
  • Similarly, an investment statement for the past three months can establish the down payment is coming from investments in your name such as an RSP, GIC or other stocks or bonds.
  • An executed Agreement of Purchase & Sale and up-to-date mortgage statement can corroborate a down payment will be provided from the sale of your current home.
  • A gift letter and proof of deposit into your account is the usual documentation required to substantiate a down payment that has been gifted from a family member.

Just as a borrower needs to meet the lender’s criteria when it comes to obtaining proper Islamic finance to purchase a home or business, a lender needs to help the borrower understand the process involved and to ensure the documentation is free from usury.

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