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A Closer Look at the Certificate of Eligibility for VA Loans

The Certificate of Eligibility (COE) is the only reliable proof of a prospective buyer’s eligibility. Having a Certificate of Eligibility doesn’t guarantee you’ll be able to get a VA loan, but lenders can’t safely close on one without it.

Certificate of Eligibility (COE) on desk
Certificate of Eligibility (COE) on desk

Even if you’re positive you meet the VA loan eligibility requirements, there’s only one way to be certain you have access to VA home loan benefits --- the Certificate of Eligibility.

This is where the VA separates belief from reality.

The Certificate of Eligibility (COE) is the only reliable proof of a prospective buyer’s eligibility. Having a Certificate of Eligibility doesn’t guarantee you’ll be able get a VA loan, but lenders can’t safely close on one without it.

It’s important for veterans to understand that getting the COE does not need to be your first step when seeking a VA home loan. In fact, it’s something lenders can often help veterans obtain.

Let’s take a closer look at the Certificate of Eligibility.

Documenting Proof of Service

Veterans will need satisfactory proof of their military service to secure a Certificate of Eligibility.

For those who served in the Armed Forces, that’s a DD Form 214, also known as a Certificate of Release or Discharge From Active Duty. Veterans who separated after Oct. 1, 1979, may need to provide the Member 4 copy of their DD-24, which includes the character of discharge and the reason for separation.

Those still serving on active duty may need to submit a current statement of service

Reservists and National Guard members don’t have a single discharge certificate like the DD-214. Instead, they should submit their latest annual retirement points summary along with evidence of their honorable service.

Army or Air National Guard members can submit NGB Form 22, a Report of Separation and Record of Service, or a points statement.

Like their Armed Forces counterparts, active members of the Reserves or National Guard may need to provide a signed statement of service that shows their key personal information. The statement also needs to clearly state that the applicant is an active Reservist or Guard member.

Veterans who can’t locate their military records can try obtaining copies either through the VA’s eBenefits portal or by submitting a completed SF-180 form to the appropriate records custodian.

There are also private companies that might be able to help veterans obtain missing records.

How to Get a Certificate of Eligibility

Veterans and service members may be able to obtain their Certificate of Eligibility online at any time through the eBenefits site.

Veterans can also fill out VA Form 26-1880 (Request for a Certificate of Eligibility) and mail it to their VA Regional Loan Center.

But you don’t need to have the COE in hand to begin the VA loan process. It’s common for VA lenders to get this document for you.

During the initial prequalification conversation, loan officers will typically ask about your service history, which gives them a good sense of whether you’re likely eligible. Prospective borrowers will typically send the lender copies of their DD-214 or other paperwork as part of the preapproval process.

As part of the preapproval process, lenders can often obtain the COE in seconds using the VA’s automated portal. If the COE can’t be pulled instantly, lenders can submit an application online and upload supporting documentation.

Some service and eligibility scenarios can require a closer look from the VA.

Surviving spouses seeking VA loan eligibility need to complete VA Form 26-1817 instead of Form 26-1880. Lenders might also seek the deceased veteran’s DD-214 and other supporting documentation to help speed the process.

There’s rarely a need for eligible veterans to update their COE before closing on their VA loan. The only time that’s an issue is if an active duty service member is discharged or released once the process has started but prior to the loan closing. At that point, the lender is going to request a new determination of the veteran’s eligibility.

While it doesn’t happen often, there are times when COEs get issued in error, even leading to a veteran or service member purchasing a home with a VA loan. If a COE was wrongly issued to a veteran in the past, they will not be able to obtain a new one unless they now meet the eligibility requirements.

What Your COE Shows

The Certificate of Eligibility is your ticket to the VA loan program. It also contains important information that can impact your $0 down purchasing power, your costs and fees and more.

Some of the basic information on the COE includes:

  • VA reference number for the certificate
  • Veteran or service member’s name
  • Last four digits of Social Security Number
  • Branch of service
  • Entitlement Code

The entitlement code provides information about the nature of your service or eligibility. There are 11 entitlement codes.

Two parts of the COE are especially important.

One is that it will typically indicate whether the borrower is exempt from paying the VA Funding Fee. This fee goes directly to the VA and is charged on all purchase and refinance loans unless the borrower has an exemption. Veterans who receive compensation for a service-connected disability and eligible surviving spouses are exempt from the fee.

The COE has a funding fee field at the top. This area will say either “Exempt”, “Non Exempt” or “Contact RLC.” There’s also a “Conditions” area at the bottom of the document that will provide more information regarding funding fee status.

For exempt borrowers, the “Conditions” field will indicate the monthly compensation rate, or that the rate hasn’t been determined, or that the lender needs to contact the VA for more details.

The “Conditions” area also tells lenders whether a prospective borrower has utilized the VA loan benefit before. Non-exempt borrower pay a higher funding fee after their first use of the program. The funding fee does not change for Interest Rate Reduction Refinance Loans (IRRRLs).

The other critical part of the COE provides information about the status of a borrower’s previous VA loans. Borrowers who have active VA loans or who have defaulted on a previous VA loan will have diminished VA loan entitlement available for another purchase.

Borrowers without full entitlement may need to make a down payment in order to secure a VA loan. Those without basic entitlement remaining will also need to borrow a minimum amount of money to move forward.

The concept of second-tier entitlement, as it’s known, can be a confusing one.

Veterans without their full entitlement can go over their situation in detail with a Veterans United loan specialist at 855-254-6455.

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