A conventional bank issues you a loan of money to buy a house, and then charges interest on the loan. This is not permissible under Islam because it is clear interest. UIF offers three different alternative financing models called Musharaka (Partnership), Murabaha (Installment Sale), and Ijara (Lease to Own). In any one of these models, UIF buys the property and sells it to you and you pay UIF a profit for using the property. There is no interest involved. UIF is simply buying and selling a house to you.
UIF’s goal is to provide its customers the lowest cost pricing structure in the Islamic finance industry. With that said our profit rate is determined by market conditions and the amount of profit our investors are looking to make on the transaction. We also track the mortgage industry pricing so that we stay competitive in the market. Please feel free to contact us and learn more about our pricing and payment programs.
There are two types of costs when you purchase or refinance a house. Financing Company charges and third party fees. Generally, third party fees comprise of property appraisal fees, credit report fees, recording fees, title insurance and other settlement costs. These fees vary depending on the State and County you are purchasing the property in. One of our experienced Financial Consultants can advise you on what your closing costs will be based on where you are financing the property.
With our home financing programs, you can put down as low as 3% of the purchase price. However, if you put down less than 20%, there will be an added cost, also known as PMI. This is charged to compensate UIF for the added risk of financing low down payment properties. The added cost is based on many factors, including the amount of down payment, credit score, term…etc. Your financing consultant can answer more questions on this topic and calculate this cost for you. UIF specializes in financing low down payment customers. Contact us and review your options before considering FHA (government) backed conventional loans.
If you are putting a down payment of 20% or more (10% for CA residents) you have the option to pay taxes and insurances yourself and a fee may apply. If you are putting down less than 20% you have to Escrow with us. UIF collects taxes and insurance on a monthly basis and pays the appropriate parties on your behalf. This insures that you are never in default due to a failure to pay taxes or maintain required property insurance.
Your mortgage payment stays the same until the contract is paid off in full. If you make a large additional payment you will end up paying the contract sooner than the original term. Making extra payments towards your outstanding balance assures that you pay less profit to UIF over the contract term.
Yes! Since UIF sells the house to you, when you sell the property UIF no longer owns the property and thus does not share in the profits with you. You can sell the house whenever you wish and pay back the remaining principal balance at closing to UIF. With our program, the title is in your name from day one.
No. Your UIF financial consultant will coordinate all paperwork with realtors, title companies, and sellers. Since this is not a conventional mortgage, we have separate and different documents that need to be signed before and at closing. Rest assured — we will guide you throughout the process and close your file in a timely fashion.
Simple answer is YES. Federal law requires that we mail you a 1098-INT form that shows how much profit you paid us during the prior year. You can deduct this profit on your Income taxes. Please consult your accountant as there may be limitation on this deduction.
Yes, this can be taken care of by our sister company, Midwest Loan Services, who services all our transactions. For more information accessing your UIF home financing account online, please visit online services.
UIF works very closely with its customers in hardship situations. Our goal is to keep you in the house and work out a potential solution. However, if you cannot make payments and there is no resolution to this matter, UIF has the right to foreclose and take possession of the property.
There is a flat fee of $50 that is used to compensate for the cost of third party collection. We do not charge you an arbitrary percentage of your monthly payment as others may. This is paid to a third party company that makes collections on our behalf at the same cost to you.
Currently, UIF offers home financing in the following states:
Arizona, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, Wisconsin. Our home financing products are only available to finance properties in these states.
The Installment Contract is a contract signed by two parties that reflects the nature of the installment sale, which is the sale of property. The Note reflects the nature of a conventional mortgage, which is a loan of money with interest.
The UIF partnership program is a faith based alternative to the conventional loan program offered by traditional lenders. Under this arrangement two parties (Financing Company aka UIF and the Customer) come together to purchase an asset. In our case “the House.”
Each party contributes their monetary share towards the purchase price of the house. Customer contributes in the form of a down payment and UIF contribution is the financing amount. Since the customer uses the home for his or her benefit, a rent is paid to UIF for using their share of the property. The rent is the “profit” UIF derives for investing in this partnership. Customer acquires the property from UIF over a 10, 15, 20 or 30 year term in monthly payments.
The monthly “Buy out” payment consists of two portions: Buyout Price and Use Payment (aka Rent). Overtime… the customer buys out UIF’s share and upon final payment takes full ownership of the property.
There are two types of Musharaka Contracts. The intention of the Partnership determines which one is more favorable to use.
Shirakatul AQD: This contract is used in traditional Business Partnership(s). Profits and Losses are shared based on the investment and agreed upon partnership terms.
Shiratkatul Milk: This contract is used to acquire hard assets. It’s used mostly to finance Real Estate, machinery, equipment, etc.
UIF’s partnership program is based on the Shirakatul Milk model. This is a partnership based on an Asset Ownership i.e. Home purchase. Even though both parties (UIF & Customer) own the home together, only one party (Customer) is deriving the benefit from its use. For this reason the Customer pays a rent to UIF for utilizing the portion of the property not owned by them. Along with the rent, they also pay additional funds (Buy out $$) to buy out UIF’s share in the property. UIF’s profit is the rent received over the term of the contract. The Customer profits from home value price appreciation.
Loss Sharing: Two Scenarios:
In case of Foreclosure: If the customer stops making monthly payments and violates the terms of the contract, UIF has the right to foreclose on the property and sell it in the open market, which could result in a loss. However, before initiating any foreclosure proceedings, UIF will make every effort to work out a payment plan that is favorable to all parties involved.
In case of Natural Disaster: Where the property is a total loss and cannot be rebuilt losses will be shared based on our ownership percentage at the time of the event.
The first step towards Home ownership is for the customer to reach out to UIF and be appointed as UIF’s agent to find the property and negotiate the terms. Once the customer finds the property and signs the contract with the seller, UIF will start the financing process. At the closing table, UIF and the Customer will sign a Declining Balance Agreement and take ownership of the property. This agreement spells out the rights and responsibilities of each party and payment terms.
While the property is owned jointly by UIF and the Customer, to keeps things simple and avoid transfer taxes, UIF will waive its right to go on title. The Sharia Board has approved this arrangement so as to not create a hardship for the customer.
Property Maintenance: As per our agreement the Customer is responsible for maintaining the property. All repairs and maintenance is the customer’s responsibility. Proper maintenance of property increases property value over time and this benefits the Customer directly in the form of price appreciation.
Property Taxes: Real Estate Property Taxes benefit the Customer and their families. RE Taxes support schools, libraries, fire departments etc. Since only the customer benefits from these services they are responsible for property tax payments.
HOI: Home Insurance is required when you finance a property. If the home is damaged due to fire or other calamity, the home insurance proceeds help pay for the repairs. Just like you have to purchase auto insurance when you drive a car, you must obtain Home Insurance when you finance a house.
The difference is in the Process and the Paperwork.
The Partnership program is based on joint ownership & subsequent buy out of the Financing Company’s share over time. Conventional loan is buying and selling of money with interest added on.
Paperwork is different. Conventional loan uses a Promissory Note which is interest based. UIF Partnership program utilizes the “Declining Balance Agreement” which is based on the Musharaka model of financing.
We offer three financing structures: lease to own, marked up installment contract, and a partnership program. You do not sign a note to borrow money. Our programs have been reviewed and approved by our board of scholars.
We are limited to real estate only and do not finance construction, development, gas stations or hotels/motels. We welcome the opportunity to finance professional offices, shopping centers, warehouses and Community Centers.
We will review your personal credit, cash flow from your business, a proven secondary source of repayment and an initial investment. Depending on the type and location of the property, the amount of your initial investment will generally be between 30% and 40% of purchase price or appraised value of the real estate, whichever is less.
Closing costs depend upon the state and the complexity of the transaction. Within the closing costs there are three kinds of fees, those charged by UIF (generally 1% of the amount financed with a $2,500 minimum), third party fees (amounts charged by other parties) and escrows (taxes and insurance).