Buying real estate through the bank

Firstly: 

Buying a property through the bank is done in one of two
ways: 

1.

The role of the bank is merely to finance the transaction, so
it gives the money to its customer or pays it on his behalf, on the basis
that the customer will pay it back in instalments, with something extra.
This is a haraam, riba-based loan. 

2.

The bank buys the property, then sells it to the customer.
This is permissible subject to certain conditions: 

(i)That the bank does not
stipulate any penalty in the event of late payment of instalments, because
stipulating this penalty is a kind of riba which is haraam, whether the bank
takes the penalty for itself or distributes it to the poor. Please see the
answer to question no. 89978.

(ii)That the customer does not sign
any purchase contract or make a promise to purchase before the bank takes
possession of the property.

(iii)That the bank does not
stipulate that a down payment be made before it takes possession of the
property, because the down payment — according to those scholars who say
that it is permissible, namely the Hanbalis — is not valid before the
contract is drawn up.

It says in Ghaayah al-Muntaha (3/79): It [the down
payment] means paying some of the price or rent after drawing up the
contract and not before. End quote. 

But the majority of Hanafi, Maaliki and Shaafa’i fuqaha’ do
not regard the down payment as valid and they do not regard it as
permissible for the seller to take it, whether it is agreed upon after the
contract or before. 

Dr. Muhammad al-‘Usaymi (may Allah preserve him) was asked:

What is the ruling on the “Manzil Mubaarak” financing program
(buying a house in the name of the bank until the loans are paid off) which
is offered by al-Bank al-‘Arabi and al-Raajihi bank?

He replied:

Many commercial banks offer financing services for buying
real estate. In the riba-based banks, the customer asks for financing, and
the commercial bank gives the money to the customer, who buys the house and
mortgages the title or ownership papers to the bank. There is no doubt that
this is riba-based financing and is haraam.

As for the Islamic banks, after the real estate is identified
by the customer, the bank buys the property in its own name and the title
deeds are transferred to it, then it sells it to the customer for a price to
be paid later with a stated, known amount of profit. There is no doubt that
this is permissible. 

One of the matters that should be noted in this case is that
it is not permissible for the bank which offers financing for real estate
purchase to demand a down payment from the customer before buying a
property. And it is not permissible for it to oblige the customer to buy the
property; rather the customer has the choice of buying or not buying. 

End quote from the Shaykh’s website. 

The point is that it is essential that the bank take
possession of the property before selling it to you, and taking possession
is done through a purchase contract between the bank and the owner of the
property. It is not essential to register the property in the name of the
bank, especially if registering involves payment of large fees as is the
case in some countries. 

Secondly: 

It is permissible to buy property from the bank by
instalments; it is also permissible to pay part of the price and to pay the
rest by instalments, such as if you pay twenty thousand, for example, and
pay the rest in instalments in a manner that is compatible with your salary
and other commitments. There is nothing wrong with the bank deciding the
price of the house on the basis of the number of years you will pay
instalments, so that if you pay part of it up front, that will reduce the
number of years during which you pay in instalments, thus reducing the price
of the property.  

And Allah knows best.