VA Loan Basics: What is the Certificate of Eligibility?

All capital letter black typography on outdoor wall stating “ten thousand mile journey starts with the first step.”

The first step toward a VA loan? The Certificate of Eligibility.

Lenders are required to get proof of a veteran’s service during the VA loan process. The Certificate of Eligibility (COE) serves as that proof, and tells a lender that an applicant has officially met the minimum service requirement.

There is more than one way to obtain a Certificate of Eligibility, and while it’s a short and simple document, it can stir up a lot of confusion. Let’s clear up the mayhem and tackle some of the most common questions regarding the Certificate of Eligibility.

What is a Certificate of Eligibility?

The Certificate of Eligibility is known as the starting point of the VA loan process and proves to a lender that a buyer has met the VA’s service requirement.

Every veteran has to meet one of the following service requirements before they can obtain a VA loan:

  • 181 days of service during peacetime
  • 90 days of service during war time
  • 6 years of service in the Reserves or National Guard
  • Some surviving spouses of service members who have died in the line of duty are also eligible

How do I get my COE?

Three ways:

  1. Ask your lender. The easiest and best method of obtaining a COE, in our opinion. Veterans United and other VA approved lenders can tap into a special database and obtain your COE in minutes.
  2. Apply online. Go to the eBenefits portal and log in or create a new account
  3. Apply via mail. Print off this form, fill it out, and return it to the address on the form.

VA Entitlement Codes

Once you obtain your Certificate of Eligibility, you’ll notice an array of information, including your name, Social Security number, branch of service and even the name of the VA employee who issued your COE. Most of it is clear and straightforward. But one part that often leads to questions from prospective VA borrowers is what’s known as your entitlement code.

This two-digit number doesn’t mean anything to borrowers, but it gives VA lenders more information about your military service history and whether you may be exempt from paying the VA Funding Fee, an upfront cost that goes directly to the Department of Veterans Affairs. Borrowers who receive compensation for a service-connected disability and eligible surviving spouses do not have to pay this fee.

Here’s a look at the 11 VA loan entitlement codes:

01 World War II
02 Korean War
03 Post-Korean
04 Vietnam War
05 Entitlement Restored
06 Un-remarried Surviving Spouse
07 Spouse of POW/MIA
08 Post World War II
09 Post-Vietnam
10 Gulf War
11 Selected Reserves

As you can tell at a glance, most of the entitlement codes relate to period of military service. But an important one for veterans who’ve used their VA loan benefit in the past is Entitlement Code 05.

This entitlement code notes that a borrower has previously obtained a VA loan, repaid the loan in full and restored the entitlement utilized on the property. These borrowers are subject to paying a higher funding fee on future VA purchases, unless their Certificate of Eligibility indicates they are exempt from the fee.

Talk with your loan officer if you have questions about your entitlement code or if you believe yours is incorrect.

What if I lose a previously issued COE?

No problem. Just obtain another one via one of the three methods listed above.

colonial style home with front porch and lawn in front of trees

The COE doesn’t guarantee that you’ll receive a VA home loan. But it’s a great start.

Does the COE guarantee that I’ll get a VA loan?

If there’s one thing the COE is not, it’s a guarantee. The word “guarantee” frequently gets tossed into VA loan discussions, but let’s make this clear: No one is guaranteed to receive a loan through the VA loan program. The COE simply signifies that you’ve cleared one hurdle on the track: namely, that you’ve met the military service requirement. Your property still has to measure up to VA criteria, and your borrower qualifications (credit score, income, debts) must meet a lender’s standards.

My lender’s automated system can’t determine my eligibility. What should I do now?

Sometimes a lender can’t automatically obtain a potential borrower’s COE. This can occasionally happen to the following potential borrowers:

  • Service members who had a prior VA loan go into foreclosure
  • Service members who were discharged under conditions other than “honorable”
  • Some Reservists and National Guard members
  • Unmarried surviving spouses

Don’t panic if you’re left hanging by a lender’s automated system. This is a relatively common occurrence, and one that VA-savvy lenders know how to handle. Military buyers are usually asked to provide supporting documentation such as a DD214 or points statement, which is sent to the VA for evaluation.

What other questions do you have?

Have any other questions about the COE? Leave them in our comments section below, or contact a Veterans United loan specialist at 855-524-7279.

You can also check out this really helpful guide on the VA home loan process and eligibility here.

Photo courtesy of mckaysavage and drothamel