Written by Isaac F. Davis

Reading a VA loan Certificate of Eligibility (COE) should only be done by an experienced VA loan specialist.  The COE is unique to the VA home loan program and is the required first step in obtaining a VA mortgage.  The basic components of a COE are:

1. Name
2. Service Number
3. Social Security Number
4. Entitlement Code
5. Branch
6. Prior VA Loans History/Status
7. Basic Entitlement
8. Previous Loan Entitlement

 

An inexperienced loan officer can make mistakes that can cost VA-eligible borrowers their loans.  Knowing how to read a COE can help avoid common mistakes.  A service person’s name and identification number will appear on all COEs.  If the service person served under a social security number instead of a service number, then no service number will be present.    

Additional identification on the COE can include the entitlement code.  The entitlement code is unique to the borrower and helps the lender determine which category the potential VA-eligible borrower’s is in.  Different VA lending fees are associated with different entitlement codes.  And, knowing how to interpret the entitlement code is essential to charging the right fee.  The VA lending fee may be waived entirely for some VA borrowers including certain surviving spouses and disabled military veterans.    

Also helpful in determining fees is the service person’s military branch.  Durations of service required for VA loan eligibility can vary for different military branches.  For example, two years service is required for regular military and six years service is required for Reservist or National Guard.  Of course, this is a stripped down summary of service requirements. More detailed service requirements including dates of service and honorable discharges at wartime also affect eligibility.  Complete service criteria can be obtained from an experienced VA loan specialist.

If a borrower who has the required duration of service has used the VA-backed loan program before, it will be indicated in the prior VA loan history.  The history reveals whether the borrower has any entitlement tied up in past loans. 

Past VA loans can affect basic entitlement indicated on the COE.  The number indicated in the basic entitlement space on the COE shows the lender whether the potential borrower has the entitlement necessary for a VA-backed mortgage of up to $144,000. 

Zero basic entitlement only means that a borrower cannot get a VA loan under $144,000.  The tricky part about COEs is that there may be additional entitlement not obvious to an untrained eye.  Additional entitlement may allow the borrower to get a loan between $144,000 and $417,000 (more in higher cost counties).  An experienced VA home loan specialist can calculate additional entitlement based on information found on the COE.

The last bit of information found on the COE is the total entitlement charged to previous loans.  This number allows the lender to calculate the portion of the borrower’s entitlement currently being used on a previous VA loan (if any) against total entitlement.  If there is entitlement occupied by another loan, it may still be possible for the borrower to have enough entitlement left over for another VA-guaranteed loan.

A VA loan professional can help most military borrowers obtain a COE instantly through the VA’s online system.  Instant COEs cannot be obtained for:

1. Reservists and National Guard members
2. Borrowers with foreclosed VA loans
3. Military members dishonorably discharged or not having enough service time
4. Surviving spouses

Some of these borrowers may still have VA home loan eligibility, but will have to obtain their COEs through a different process. 

More information on how to read a COE can be obtained by contacting a VA-approved specialty lender.