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Trying to compare conventional US mortgages to foreign mortgages is like comparing tomatoes to potatoes. There is such a wide difference between the two. Overseas mortgages, such as Islamic Mortgages are based on no interest. The concept of a no interest mortgage is a form of seller financing in a glorified manner.

Conventional American-type Mortgage:

A conventional type US mortgage has some basic principals which include a down payment, credit checks, qualification ratios and finalizing the paperwork. A buyer goes to a bank and fills out an application and if approved he places a down payment down on the loan. He closes the transaction in escrow and pays for some closing cost and gets a deed of trust in his name. The bank may sell the loan to another bank or financial corporation, but in no way holds a restrictive title to the home. The seller is able to borrow against the home and place a second or even a third trust deed on the house. Maybe he wants to remodel his home so he would be able in many cases to borrow against the equity in the home or take out a Title 1 FHA loan on the home.

Islamic of No Interest Loan:

What exactly is an Islamic no interest loan? This type of loan is basically a loan where the interest is called rent. In some cases the price of the home is raised in price to cover interest of the loan. As long as the word interest is not used, than the loan is acceptable with certain conditions.

1. The bank cannot be a regular bank who charges interest to its regular clients. So a Muslim could not borrow from Bank of America, even though they are offering one of the two kinds of Islamic loans.
2. The word interest cannot be used in any way shape or form. So you could not say the word "percentage" either.

There are two different kinds of Islamic loans and they are Murabaha and Ijara. Each has its benefits.

Murabaha Islamic Business Transaction:

A very common type loan or business transaction is called Murabaha. It is not a loan, but it is called that for understanding purposes. The bank buys the property in question and then resells the property back to they buyer at a profit. So the bank buys the property for $175,000 and then sells the property back to the buyer for $200,000 amortized over a 20-30 year period (example only). The bank gives the buyer title to the home and the buyer moves in right away. The buyer will pay anywhere from 10-30 percent down payment on the loan.

Ijara or "Decreasing Rent" Business Transaction:

In this transaction, the bank

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