Using Gift Money for Your VA Loan Upfront Costs in California

VA loans offer a number of compelling benefits for California military members and veterans who are buying homes. This program allows you to finance up to 100% of the purchase price, eliminating the need for a down payment.

But there’s another big benefit many people don’t know about.

The Department of Veterans Affairs allows home buyers with VA loans to use gift money for their closing costs and (if applicable) the down payment.

1. VA loans are limited to military members, veterans, and certain surviving spouses.
2. Eligible borrowers can buy a house in California with no down payment whatsoever.
3. Some borrowers choose to make a down payment, but it’s not required in most cases.
4. VA loans typically come with closing costs, which can add up to thousands of dollars.
5. Borrowers can potentially use gift money from a third party to cover their closing costs.
6. Gift money can also be used for a down payment, if the borrower decides to make one.

Definitions: VA Loans, Closing Costs, and Gift Money

Before we go any further, we should cover some of the terminology used throughout this guide:

VA Loans

VA loans are mortgage loans offered to eligible veterans, active-duty service members, and certain members of the National Guard and Reserve. This loan program helps veterans and their families purchase homes with favorable terms, such as no down payment requirements and competitive interest rates, making homeownership more accessible.

Closing Costs

These are the various fees and expenses a home buyer must pay in order to finalize a mortgage loan transaction and home purchase. All types of mortgage loans come with closing costs, including the VA program. The cost can vary due to a number of variables but typically ranges from 1.5% to 5% of the home’s purchase price.

Down Payment

A down payment is the amount of money a home buyer pays upfront toward the purchase price of a home. It’s typically expressed as a percentage of the total price, with the rest covered by a mortgage loan. Most loan programs require a down payment of some kind, but the VA loan program does not.

Gift Money

This is when a family member or other approved donor provides a sum of money to a home buyer to help cover their down payment and/or closing costs. Lenders often require a gift letter, signed by the donor, to verify that the funds are a genuine gift and not a personal loan.

Closing Costs for VA Loans in California

In California, closing costs for VA loans typically range from 1.5% to 5% of the purchase price. But those numbers aren’t set in stone.

In a state like California, with higher-than-average home prices, the closing costs associated with a mortgage loan can add up to a significant amount of money.

When this article was published in 2025, the median home value for the state of California was around $789,000. Applying the 1.5% to 5% range, this means the estimated closing costs for a VA loan might range from $11,835 to over $39,000.

• California home buyers who use a VA loan can finance up to 100% of the purchase price, eliminating the need for a down payment. This greatly reduces the upfront expense associated with a home purchase.
• Home buyers who use VA loans can also apply gift money to their closing costs. This means they can receive financial support from a friend or family member who is willing to donate money on their behalf.

Using Gift Money From a Third Party

These days, most types of mortgage loans allow borrowers to use a certain amount of gift money to help cover their down payment or closing costs.

This is true for the VA loan program as well. The Department of Veterans Affairs allows home buyers in California to apply third-party funds to their closing costs.

But there are certain rules and requirements regarding the use of gift money for VA-guaranteed mortgage loans.

For one thing, the person donating the money will have to provide a signed letter stating they do not expect repayment. The money must truly be a gift, with no strings attached.

They go on to state that the gift letter must include the following components:

1. The exact dollar amount of the gift
2. A statement from the donor that no repayment is expected
3. The donor’s name, phone number, address, and relationship to the borrower

That’s pretty straightforward. In fact, a person could meet these minimum requirements with a one-paragraph letter followed by a signature block and contact information.

Other Benefits Offered by This Program

Being able to use gift money for the closing costs or down payment on a VA loan is a major benefit, especially in a pricey real estate market like California. But this program offers other important benefits as well, including the following:

1. You don’t need to make a down payment.

An eligible borrower can use this program to buy a house with no down payment. This feature eliminates one of the biggest obstacles to homeownership, allowing you to purchase a home sooner rather than later.

2. You can avoid paying mortgage insurance.

With a conventional mortgage loan, a home buyer who makes a relatively low down payment will have to pay mortgage insurance to offset the risk. This is true for the FHA loan program as well, which requires its own form of mortgage insurance.

But this kind of insurance is not required for VA home loans. This is the only financing program that allows military members and veterans to buy a house with no down payment and no mortgage insurance.

3. VA loans have flexible qualification criteria.

As we wrote in a previous blog post, VA loans are one of the easiest types of mortgage loans to qualify for. That’s because the federal government provides lenders with a partial guarantee against losses resulting from borrower default.

Because of this, lenders can be more flexible with their qualification criteria. You don’t need perfect credit to qualify for a VA-guaranteed mortgage loan in California.

If you have decent credit, manageable debt, and enough income to cover your monthly payments and other recurring expenses — you might be well qualified for this program.

4. You can use the program repeatedly over the years.

The VA home loan benefit is not a one-and-done type of situation. You can use the program again and again over the years, as long as you meet the minimum eligibility requirements.

For example, a person with a VA loan who sells the home and pays off the mortgage debt will restore their entitlement. This means they could use the program again when purchasing their next home.