The VA Certificate of Eligibility

The Certificate of Eligibility (COE) for a VA loan is a very important document if you are purchasing your home with a VA loan. What is it, why is it important, and how do you read it, are just some of the questions we will answer today.

What is the COE?

A VA Certificate of Eligibility (COE) is a one-page document that verifies you are eligible for a VA-backed home loan due to your military service. It says you are “eligible”. It does NOT say you are “qualified”. Qualifying is the process your lender will go through to determine that you can afford the mortgage payments and meet minimum VA guidelines.

Does having a COE mean I am guaranteed a VA loan?

No, it does not. The VA loan is “guaranteed” by the VA in case of a foreclosure loss. It is not “guaranteed” for every veteran, since you still need to qualify for the loan.

Is the COE the same as the DD-214?

No, not at all. The DD Form 214 or “DD-214” is proof of military service and is given to you at the time of your military discharge or retirement from the military.?It does not show eligibility for the VA home loan. That is only on the VA COE.

Why is it important?

Without a COE, you can’t get a VA loan. That’s what makes it so important.

How do I get my COE?

Most mortgage lenders who provide VA financing will get this for you. At Veterans United, our system automatically pulls your COE from the VA at the time you apply for pre-approval. If for any reason it is not immediately available, we will request proof of your military service from you and submit that to the VA to get your COE.

As the veteran, can I get a COE myself, direct from the VA?

Yes, you can, using the VA.gov website [va.gov]. However, we don’t recommend it. The reason is that what is on the COE is sometimes misunderstood by veterans and even lenders, so it’s best to have a VA Loan Specialist get it and interpret it for you.

Will the lender issue a VA pre-approval letter without getting a COE first?

Typically, no. We have made some rare exceptions when a VA-disabled veteran has no prior VA loan use and we have every reason to believe you are eligible. (Receiving a VA disability rating from the VA is a good indication you will be eligible.) However, most lenders will not do that, especially if you have had a VA loan in the past, or have one now, or had a VA foreclosure or short sale, or you served in the National Guard or Reserves, or you are the surviving spouse of a deceased veteran. In those cases, we will almost always wait for the VA COE prior to issuing a pre-approval letter.

How do I read the COE?

There are three main sections of the VA COE.

The Header:

Most of the fields in the header are self-explanatory. The entitlement code represents the time period you served, but if it says “05” it means your entitlement has been restored. If it says “06”, then you are a surviving spouse of a veteran. The main thing the lender looks for here is the Funding Fee status. That determines if you will pay a VA funding fee or not. (For more information on that, see my April 2024 newsletter.)

The Entitlement Section:

This section provides loan specific information for any previous VA loans that are still active, that were part of a VA foreclosure loss, or that have been paid in full, but where entitlement has not yet been restored. This is very helpful information for lenders to calculate how much VA entitlement you have available for another VA loan. (For more information on how VA entitlement works, see my January 2024 newsletter.)

The Conditions Section:

This bottom section of the COE includes notes related to your VA funding fee or other things the lender needs to be aware of. The sample COE above shows that this veteran will have a subsequent use VA funding fee due to having previously used her VA loan. The second condition is a reminder that she is not exempt from the VA funding fee as well, even though it is also in the Header under the Funding Fee status. If you are on active duty, for instance, the Conditions will say that the lender needs to obtain a Statement of Service to show you are still on active duty. If you used your VA loan previously and paid off the loan, but retained the property, then the conditions would have a note about one-time restoration being used.

Why does my COE say my entitlement is $36,000?

That number shows that you have “full entitlement”. The $36,000 is NOT the total amount you can borrow. What it actually means is that if you default on your loan that’s under $144,000, the VA guarantees to pay the lender up to $36,000 for any losses the lender incurs. The VA also guarantees loans over $144,000 and that is what you will find in the small print under the entitlement section of the COE. (For more on VA entitlement, see my January 2024 newsletter.)

What if my COE shows “This Veteran’s Basic Entitlement is $0”?

In that case, you may still have VA entitlement available by using something called “second-tier entitlement”. For the record, we have had other lenders tell military veterans they were not eligible for a VA loan because their COE says their basic entitlement is $0, but that is not how entitlement works and that is why it is so important that a VA Loan Specialist obtain and interpret the COE for you. (Again, see the January 2024 newsletter for details.)? ?

In Summary…

The VA Certificate of Eligibility should be handled by your VA lender early in the loan process, prior to pre-approval, to confirm you are eligible for a VA loan.

Got questions about VA loans?

Great, just email?[email protected]?or call/text 512-357-7762, because everyone needs a VA Loan Specialist! ?