No there isn’t a gift card you can pick up for a friend at your local mortgage lender. However there is a transaction that people use to pay for things like closing costs called “gift funds”.
Typically they come in two forms. A gift such as grant money issued by the government or a gift issued by a family member.
Lenders understand that purchasing a home isn’t cheap, that is why gift funds are such a popular option. And just like the name implies, gift funds do not have to be paid back since they are a gift! That means no second mortgage or additional monthly payments.
Down payment assistance
The first type of gift is down payment assistance (DPA), gifted by the government. Programs like California’s Platinum DPA offer gift funds to certain government employees such as first responders and teachers.
A DPA gift fund can be used towards down payment assistance or the closing costs of the loan. Furthermore, the gift amount can be as great as 5% of the homes sale price.
The second type gift is one issued by a family member such as a parent or sibling. Funds must be sources by bank statements and the family member will have to issue a written statement of the funds being gifted.
If you have any questions about gift funds and how to apply it to your next purchase or refinance, reach out to us. We offer free consultation: