Ruling of Applying for Housing Credit via Bank
There are two ways of buying goods via bank:
Firstly, a muslim goes to a bank and tell the bank, “I want to buy a certain house or car.” The bank says, “We don’t have it. Please check out if there is something that suits you, tell us, and we’ll buy it.” Then he goes to find what he wants, and when he finds it, he informs the bank of it, and the bank buys it.
After the bank buys and has it, then the bank makes a transaction with its client and there is no agreement that ties the client when the bank hasn’t buy and own the goods. For example, the client doesn’t store some down-payment, or certain amount of money which some people called “administration fee”, nor anything as a compensation of bank’s willingness to help him in realizing his wish, and it is not allowed to sign any written agreement which stated about the ability to buy the goods after the bank owns it. These are not allowed until the bank has the intended house.
After the bank fully owns the intended house, the client has a right to choose. If he still wants to buy it, he can. And if he doesn’t, he may cancel his wish to buy.
If the client goes on to buy the house, in this case, majority of scholars have allowed it (the transaction, -ed), because there is no reason to prohibit it.
Whereas Sheikh al Islam Ibn Taimiyya and Ibn al Qayyim chose the similar opinion as some of the experts in jurisprudence from the age of the predecessors who perceived that such transaction is actually a usury, thus it is not allowed.
The conclusion is, anyone who find another solution, should avoid this kind of transaction. Whereas anyone who doesn’t find it, then the opinion that we choose in our fatwa, with our limited knowledge, is that this kind of transaction is alright since we do not know any principles in shari’a that demands us to prohibit it.
Secondly, there is a binding agreement that bind the client to buy the goods before the bank buys and owns it. For example, I want to buy a certain house, then the bank says, “Alright, but please sign these papers first, or please sign this agreement.” Only After the agreement is signed that the bank buys the intended house. Or, you write down an agreement that binds you, which content states that if the bank has bought the house that you want, you’ll buy it, and if you don’t you’ll be fined some amount of money.
This kind of transaction is forbidden, because in reality, the bank sells goods that it hasn’t owned yet.
There is also another form of this second transaction, that is, the buyer of the intended house is the client himself, and not the bank. Thus, transaction takes place between the house owner and the client, and bank only takes part as the payer. This is a true usury and no doubt, since it is usury, it is a forbidden act. We need to note this.
Every muslim needs to know that shari’a rules applies on all muslims, whether they are majority or minority in their area. Usury is still forbidden for a muslim even though he is the only muslim in his country.
Getting involved with bank in order to be able to have a house, by violating the shari’a law, is something forbidden, whether in Europe, or in other places.
This is the explanation of Sheikh Dr. Sulaiman bin Salimullah Ar Ruhaili, lecturer in Islamic University of Medina, which Arabic version could be heard on minutes 01:22:15 to 01:26:31, in a record labelled Al-Ijabah ‘an As-ilah ad Durus 025, available for download in this following link: