StructureGuidance and the buyer form an LLC co-ownership of the property; Guidance contributes the bulk of the price, the buyer the down payment. The buyer occupies the home and pays monthly (a) acquisition payments that buy out Guidance's ownership shares over time and (b) a profit/usufruct payment for using Guidance's remaining share. Title sits in the co-ownership until the buyer reaches 100%. On default the property is sold and proceeds split per ownership share rather than a foreclosure deficiency pursued against the borrower.
The longest-operating and largest US Islamic home provider. Its co-ownership structure carries one of the most credible Shariah boards in the West, and AMJA ruled it permissible in the face of need — while flagging an unjust distribution of taxes, insurance and maintenance. Permissibility still turns on rent calibration, who bears ownership risk, and the default mechanism in your executed contract.
Read the contract →Contract-grade public documents were read directly (e.g. a full Terms & Conditions or a scholar-reviewed contract). This rates our certainty, not the provider’s compliance.
Established & regulatory standing
The verifiable facts
Established
Founded 2002 in Reston, VA; became the largest US Islamic home-finance provider. A subsidiary of Guidance Financial Group.
Regulatory standing
Non-bank mortgage financier — NOT a depository, so no FDIC insurance applies. Licensed state-by-state via NMLS (#2908) in 30+ states (e.g. under the California Residential Mortgage Lending Act). Contracts are sold to Freddie Mac/Fannie Mae after origination.
Shariah board
Who certifies it
A named, high-credibility 7-scholar Shariah Supervisory Board (AAOIFI-affiliated): Justice (Ret.) Mufti Taqi Usmani (Chairman), Sh. Yusuf Talal DeLorenzo, Sh. Nizam Yaquby, Dr. Mohamed A. Elgari, Dr. Abdul Sattar Abu Ghuddah, Dr. Imran Ashraf Usmani and Dr. Mohd Daud Bakar — among the most credible boards in US Islamic finance.
A named, credentialled board is a real signal — but a provider’s own board certifying its own product is not the same as arm’s-length review. Weigh it alongside the independent commentary below.
Independent scholarly review
What independent scholars have said
AMJA Resident Fatwa Committee (resolution adopted Feb 2014, published Oct 2014): Guidance ruled PERMISSIBLE in the face of need, and AMJA noted its contract is generally more developed than alternatives. Stated reservation: maintenance, taxes and insurance 'are not distributed in a just manner' — the burden falls more on the customer than a true partnership implies.
Independent commentary is weighed, not treated as a final personal ruling. A body that rules one way is one respected voice, not a universal consensus — and rulings can lag changes to a live contract.
How the structure works
The mechanics, in principle
Guidance and the buyer form an LLC co-ownership of the property; Guidance contributes the bulk of the price, the buyer the down payment. The buyer occupies the home and pays monthly (a) acquisition payments that buy out Guidance's ownership shares over time and (b) a profit/usufruct payment for using Guidance's remaining share. Title sits in the co-ownership until the buyer reaches 100%. On default the property is sold and proceeds split per ownership share rather than a foreclosure deficiency pursued against the borrower.
This describes the structure in principle — it is not a verdict on the executed contract. How the contract actually behaves is what the checklist below tests.
From the public documents
How the contract actually works
Read from Guidance Residential’s own public materials — white papers, product pages, FAQs and fatāwā — not its executed contract, which is generally not published. Where a point is undisclosed, it is said plainly rather than guessed. Sources are listed below.
Guidance's published white paper describes a diminishing-mushārakah co-ownership: the customer and a Guidance affiliate become co-owners, with Guidance acquiring its stake through a single-purpose LLC, and the relationship governed by a "Co-ownership Agreement rather than conventional loan documentation". Title is NOT always taken by the financier: "Guidance normally goes on record as co-owner on the title... However, there are a number of states where adding Guidance to the title exposes the customer to additional taxes... [the] Sharia Supervisory Board has found no objection to keeping Guidance off title". Profit is openly benchmarked to conventional rates: "Guidance determines the Profit Payment offered to its customers to be competitive with prevailing interest rates" and "Profit Payments may even be adjustable and linked to an interest rate index (subject to certain caps)". The monthly payment splits into a Profit Payment (rent on Guidance's share) and an Acquisition Payment (which buys down Guidance's share), creating the declining balance. On default, "the Co-ownership Agreement allows the co-owner to foreclose and sell the property"; the co-owner recovers what it "would have obtained had the customer fully bought out its share" with any surplus to the customer, "No interest may be charged on late payments", and a "non-recourse clause... protects all of the customer's assets other than the property from being subject to foreclosure". The late fee is "$50 per late payment"; early payoff carries "no additional fees or penalties". Co-owners share gains/losses by ownership share only in forced-sale (eminent domain) or insured-total-loss scenarios, not in an ordinary voluntary sale. The white paper's fatwa is signed (21 Oct 2002) by Taqi Usmani, Nizam Yaquby, Abdul Sattar Abu Ghuddah, Yusuf DeLorenzo, Mohamed Elgari and Imran Usmani. Honest limit: the executed Co-Ownership Agreement, Security Instrument and related instruments are named in the fatwa but not published in full, and the current profit-rate index/caps are not in the public white paper.
The Six-Pillar test
The questions that decide it
This is the universal lens this site applies to every home-finance contract, anywhere. Read each pillar as a question to put to Guidance Residential’s executed contract — not its brochure.
- 1
Real ownership
Does the financier genuinely take ownership of the asset — even briefly — and bear a real owner's risk, rather than only ever holding a debt secured against it?
- 2
Risk-sharing
If the asset is destroyed or its value collapses, does the financier share that loss in proportion to its stake, or is the customer left bearing it alone?
- 3
Rent vs interest
In a lease/co-ownership, is the rent benchmarked to a genuine market rent for the property — or is it calibrated to an interest rate (a base-rate + margin) in disguise?
- 4
Default mechanism
On default, does the contract behave like the end of a real lease/partnership — or does it accelerate like a loan, demanding the full outstanding 'principal' plus charges?
- 5
No guaranteed pre-fixed return
Is the financier's return tied to real ownership and risk, or is it a pre-fixed, guaranteed sum that arrives regardless of what happens to the asset?
- 6
Substance over form
Strip away the Arabic labels: does the cashflow, risk, and outcome differ from a conventional loan — or is it the same economics wearing a compliant name (ḥiyal)?
Before you sign
What to ask Guidance Residential, in writing
Put these to the provider in writing and keep the answers. The reply — not the marketing — is what tells you whether the structure holds.
Is the monthly 'profit' payment calculated from a genuine market rent for this property, or is it pegged to an interest index (a base rate + margin)?
In a default/forced sale, exactly how are losses (and any shortfall vs. market value) split between me and Guidance under the co-ownership share?
Who pays property taxes, insurance and major maintenance, and how is that reconciled against Guidance's remaining ownership share? (AMJA's specific objection.)
Since contracts are sold to Freddie Mac, does anything about the Shariah structure change after the sale, and who services it?
What happens to my accumulated ownership shares if I sell early or refinance?
The honest gap
What we have not verified
- Whether pricing benchmarked to conventional interest indices undermines the substance of the mushārakah even where the form is co-ownership.
- Whether AMJA's 'unjust distribution of taxes/insurance/maintenance' objection has been fully remedied since 2014.
- Whether onward sale to Freddie Mac (a conventional GSE) raises any concern for the buyer's contract.
The reasoning
Why this verdict, and not another
A verdict is only as honest as the reasoning behind it. Here is why Guidance Residential sits where it does — what keeps it off a clean pass, and what keeps it off an outright avoid.
Not a clean pass because
Guidance's own white paper states the profit payment is set to be “competitive with prevailing interest rates” and may be index-linked, and it openly waives going on title in tax-sensitive states — so the rent-calibration and genuine-ownership questions remain live until your executed Co-ownership Agreement is read.
Not an outright avoid because
It runs a documented diminishing-mushārakah co-ownership with one of the most credible Shariah boards in the West, a non-recourse default clause, no interest on arrears, and AMJA ruled it permissible in need — there is no positive evidence of riba-mimicry, only unresolved calibration questions.
Sources
What this read is built on
The verifiable references behind this page — provider documents and independent scholarly resolutions. Read them yourself; do not take our summary on trust.
- Guidance Residential — Shariah Board (scholar list)
- Guidance — Declining Balance Co-Ownership white paper (PDF)
- Guidance — Why we sell contracts to Freddie Mac
- AMJA Resident Fatwa Committee resolution (US home-finance companies)
- Massachusetts DOR Letter Ruling 05-3 (legal/tax description of the program)
- US Patent App. US20030233324A1 — Declining-balance co-ownership financing arrangement