Did You Serve? How to Read Your COE.
By Terry Roberts
The Home Loan Hub
Published 12:30pm Dec. 28, 2022
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Did you serve? If so, you may be eligible for the VA home loan benefit. The VA home loan benefit is a fantastic option for qualifying servicemembers and veterans who are interested in purchasing a home to live in as their primary home. The VA home loan benefit requires $0 down payment and does not require any private mortgage insurance (PMI). This benefit has no prepayment penalty and is available to the qualifying veteran for life. It can also be used multiple times.
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Qualifying servicemembers and Veterans must access their Certificate of Eligibility (COE) before they can leverage the VA home loan benefit. Contact me to request a copy of your COE. If you’re fortunate enough to be eligible for the VA home loan and have obtained your COE, it will be important to know how to read the COE.
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Every Certificate of Eligibility has 6 parts that the veteran should be familiar with:
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Entitlement Code
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Branch of Service
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Funding Fee
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Prior Loans Charged to Entitlement
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Amount of Available Entitlement
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Conditions on the COE
1. Entitlement Code
The entitlement code affirms your military service that is specific to which era or service time period in which you were in the military. There are eleven entitlement codes and their matching service periods.
2. Branch of Service
For those veterans who served in multiple branches, the branch that will post on the COE will likely be the most recent branch that the veteran was discharged from where at least 2 years of active, honorable service was completed.
3. Funding Fee
Unless the veteran has a VA service-connected disability rating of at least 10%, they must pay a one-time funding fee. The VA funding fee is a closing cost for the Department of Veterans Affairs and is typically financed in with the loan. In the sample above, this veteran is exempt from the VA funding fee, due to having a service-connected disability.
4. Prior Loans Charged to Entitlement
When a veteran has a current VA loan for a different home that has not been paid in full, this section will highlight the specifics about that loan, including entitlement charged. It is possible to have more than one VA loan at a time, but will depend on how much entitlement was used with the current VA loan. If the current VA loan is paid off, then the VA certificate of eligibility will be restored back to basic entitlement.
5. Basic Entitlement
A veteran’s basic entitlement when they have not previously used their VA home loan benefit is $36,000.Additional entitlement is available for most loans in excess of $144,000.In such cases, the entitlement amount is 25% of the VA loan limit for the county where the property is located. However, due to the recent passing of the Blue Water Navy Vietnam Veterans Act of 2019, VA-guaranteed home loans will no longer be limited to the Federal Housing Finance Agency (Federally-established) Confirming Loan Limits. This means that if a veteran qualifies for a $1.5 million-dollar home, they can purchase that home with no down payment or PMI.
6. Conditions
The VA may include conditions in this section of the COE that will highlight particular eligibility requirements. In the COE sample above, it confirms that this veteran is exempt from the VA funding fee, due to having a service-connected disability and they receive $1,933 in monthly disability income. This income is non-taxable and can be used for VA home loan qualification purposes.
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If you believe you may be eligible for the VA home loan benefit, please visit me here to learn more or request a copy of your VA Certificate of Eligibility.
Terry Roberts is a U.S. Marine Corps Veteran and specializes in residential mortgages, including new construction, conventional, FHA, and VA home loans. He has helped more than 10,000 clients start the homebuying process across America.
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