Why this matters
For many Muslim families, the concern with a conventional mortgage is riba, or interest. Some families rent for decades rather than take a loan they feel is wrong. Others buy and carry that worry for years. Both are hard. The good news is that in the United States there are established companies that finance homes using structures designed to avoid interest, and several of them serve California.
What this lesson does, and doesn’t do
We explain how these products work and who offers them, so you can make an informed choice. We don’t issue religious rulings. Scholars differ on the details of these structures. Please discuss your decision with your imam or a scholar you trust.
Three structures, in plain words
Diminishing musharakah (co-ownership)
You and the provider buy the home together. If you put 10% down, you own 10% and the provider owns 90%. Each month your payment does two things: part of it buys a little more of the provider’s share, and part of it pays the provider for your use of the share it still owns, similar to rent. Over the years your share grows until you own 100%. This is the most common structure among the larger U.S. providers.
Murabaha (cost-plus sale)
The provider buys the home and sells it to you at a higher price that is fixed on day one. You pay that price in installments. Because the price is set at the start and doesn’t change, the transaction is structured as a sale rather than a loan.
Ijara (lease to own)
The provider owns the home and leases it to you. Your payments cover the lease, and part goes toward buying the home, which transfers to you at the end of the term.
| Structure | Who owns the home at the start | What your monthly payment covers |
|---|---|---|
| Diminishing musharakah | You and the provider, together | Buying more of the provider’s share, plus a fee for using its share |
| Murabaha | You, after buying from the provider | Installments on a fixed, agreed sale price |
| Ijara | The provider | Lease payments, with ownership transferring over time |
Providers that serve California
We list these so you can research them yourself. We receive nothing from any of them, and listing is not a recommendation. Availability changes, so confirm each provider is licensed in your state before you apply.
Guidance Residential
One of the largest U.S. providers, using a co-ownership model.
UIF
Home financing in many states. In 2026, LARIBA (American Finance House), one of the oldest U.S. providers, was reported to have merged into UIF.
Ijara CDC
A nonprofit focused on lease-to-own financing.
Devon Bank
A Chicago community bank with an Islamic finance program. Check whether it lends in your state.
Ameen Housing Cooperative
Typically asks for a larger down payment, around 10%, and can be an option for buyers who don’t fit the larger providers.
How to verify any provider in two minutes
Search the company’s name at NMLS Consumer Access, the official registry of licensed mortgage companies. It shows which states they are licensed in. If a company isn’t listed there, don’t send it money or documents.
Is it more expensive?
Sometimes a little, sometimes not. Most providers price their products with reference to market rates, so monthly payments are often in the same range as a conventional loan, and some cost somewhat more. The honest answer is: compare actual offers, not reputations.
Regulated providers give you a standard Loan Estimate, the same three-page federal form conventional lenders use. Get at least two, and compare them line by line: the monthly payment, the cash needed at closing, and the total fees. We’re happy to help you read them.
Questions to ask any provider
- Which structure do you use, and can I read the contract before I apply?
- Who is on your Sharia board, and can I read the board’s approval of this product?
- Are you licensed in my state, and do you lend in my county?
- What is your minimum down payment and credit score?
- Is there a penalty if I pay early or want to buy out your share sooner?
- What happens if I miss a payment, or need to sell in a few years?
- Can your financing be combined with a down payment assistance program?
Sources you can check
- NMLS Consumer Access: confirm that any provider is licensed in your state.
- CFPB: Understanding your Loan Estimate: how to read and compare offers.
- Guidance Residential, UIF, and Devon Bank: provider websites. For Ijara CDC and Ameen Housing Cooperative, search their names to reach their official sites.