03 Mar What Is the VA Loan Certificate of Eligibility?
When processing a VA loan, lenders must obtain proof of a Veteran’s military service. The Certificate of Eligibility (COE) documents that an applicant has formally met the VA’s military service requirement.
A crucial thing to remember about the COE is that you are not required to have one to begin the VA loan process. Without a COE, you may be able to receive a preapproval letter. Before closing, however, you or your lender must secure the document. In the event of any future delays or questions about the Veteran’s military status, the application might be denied.
Let’s look at some of the most often asked questions about the VA Loan Certificate of Eligibility.
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What Is the VA Loan Certificate of Eligibility?
The first step in receiving a VA loan is to get a certificate of eligibility (COE). The Certificate of Eligibility (COE) is issued by the United States Department of Veterans Affairs and serves as proof that you fit the requirements for a VA loan. Unfortunately, you won’t be able to take advantage of cheap VA loan rates and other benefits until you have it.
The COE also outlines your VA loan eligibility and whether you must pay the VA funding fee.
Why Is Having a COE Important?
A lender can only verify your eligibility for a VA home loan benefit and complete your mortgage if you have a Certificate of Eligibility. The advantages won’t be available to you unless you have your certificate of eligibility.
Your name, branch of service, and an “entitlement code” will all be listed on your Certificate of Eligibility. This code informs your lender about how you qualify for the loan.
When you apply for a VA loan, the Certificate of Eligibility will notify you if you’ll have to pay a financing fee. The financing fee is a one-time cost that can be incorporated into your mortgage or paid at closing. The amount varies depending on VA requirements.
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Where to Apply for the VA Loan Certificate of Eligibility
For obtaining your VA Loan Certificate of Eligibility, you can choose from three application options.
Through Your Housing Lender
If you know which VA lender you want to work with, you can request assistance acquiring your COE from that lender.
The VA eBenefits platform is the quickest and most efficient method of obtaining your certificate of eligibility.
Print the COE request form from the VA, fill it out and mail it to the relevant regional loan center (the addresses are on the form). Please keep in mind that this choice will take longer.
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How to Read a VA Loan Certificate of Eligibility
A VA Loan Certificate of Eligibility contains five sections that outline the VA loan funding fee, whether it is your first application, and how much you qualify for in a VA home loan. The following are the five sections:
Based on the “period” of service, VA Entitlement Codes are used to identify the service member’s eligibility conditions. This is a number that verifies your military service and, more specifically, a certain period of service.
|01||World War II|
|02||World War II|
|06||Un-remarried Surviving Spouse|
|07||Spouse of POW/MIA|
|08||Post-World War II|
|10||Persian Gulf War|
*Era refers to the separation, effective, or dishonorable discharge period.
Note: Veterans with dishonorable discharges are not eligible to receive VA benefits.
The VA Loan Funding Fee
The VA Funding Fee is the following item on the Certificate of Eligibility. The financing fee is a one-time payment made to the VA to cover the closing costs. One of three choices appears in this field:
a. “Exempt” means that the borrower is not required to pay a funding fee.
b. “Non-exempt” applies to loans where the borrower must pay a funding fee.
c. “Contact RLC” signifies that the COE-generating system cannot determine and that more information is required.
Prior VA Loans (Or the Lack Of)
This area informs the lender whether or not you have a VA loan. If you have a current VA loan, the status will show as “ACTIVE.” When applying for a loan today, the lender will need to know whether you have previously used your VA benefits so that they can determine whether you have enough entitlement to cover the loan you are applying for today.
Your VA Loan Entitlement Amount
The entitlement amount part of a VA Loan Certificate of Eligibility is likely the most perplexing. This section assists your lender in determining what actions need to be taken concerning your entitlement. In addition to the “basic entitlement amount,” the COE will specify the extra entitlement associated with most loans.
Some criteria, detailed in the middle of the form, may limit your claim or specify bonus entitlement. Understanding the conditions indicated on your COE will assist you in determining your VA home loan eligibility and any additional actions that need to be performed.
This is where the lender can find out which funding fee level is necessary (first-time or subsequent use) and any other information about the borrower, such as current exemption status for the VA loan funding charge, and so on.
A Sample of COE Letter From VA
What if I Lose My COE?
If you lose your COE, it isn’t a big deal. To apply for a new one, follow the three steps outlined above.
How Long Does It Take To Get the VA Certificate of Eligibility?
Depending on how you apply, obtaining a Certificate of Eligibility can take some time. For example, requesting a COE by mail will take 4 to 6 weeks, but applying online or through a lender takes just minutes.
Related Article: How Do I Get a VA Certificate of Eligibility?
Does the COE Guarantee VA Loan Approval?
Unfortunately, a VA COE does not guarantee that a VA home loan will be approved. You give your lender permission to examine your VA loan application by signing a COE. Furthermore, VA COEs are only valid for house loans and do not apply to any other VA benefits.
Next Steps for Purchasing a Home With a VA Home Loan
You can begin the VA loan application procedure when you receive your COE. However, it does not guarantee that you will receive an approved VA loan; they merely indicate that you can apply for one. You’ll still have to go through the application procedure and meet the lender’s requirements, which differ by lender.
In this stage, the process resembles that of other loans in that it involves examining your credit history, debt-to-income ratio, and overall financial situation.