What's in this article?
If you’re a current or former member of the service, a VA loan can help you achieve affordable homeownership.
Created in 1944 as a way to help service members returning from the war, the Department of Veteran Affairs has helped guarantee over 18 million loans to veterans.
VA loans come with several benefits such as:
- Low or no down payment
- Lower interest rates
- Limited closing costs
- No private mortgage insurance required
- Lifetime benefit: possible to use multiple times
The first step in applying for a VA loan is to get a VA Certificate of Eligibility. We’ll break down what this is, why you need it, how to get it, and its benefits.
What is a VA Certificate of Eligibility?
A Certificate of Eligibility (COE) is a form that shows lenders you’re eligible for a VA loan. A COE is required when applying for a VA loan.
One of the benefits of getting a VA loan is that the VA guarantees a portion of your loan. The amount of that guarantee is called your entitlement. This entitlement protects lenders so that you don’t have to pay more money out of pocket.
The COE will help lenders determine the amount of your entitlement and help figure out what kind of loan fits your needs.
Certificate of Eligibility Qualifications
To qualify for a VA loan, you must meet one of the following criteria:
- Served 181 days of service during peacetime
- Served 90 days of service during wartime
- Have six years of creditable service in the Reserves or National Guard or 90 days serving under Title 32 with at least 30 of those days being consecutive
- Are the surviving spouse of a service member who died in the line of duty
These service time requirements don’t apply if you were discharged because of a service-related disability.
A COE will basically confirm that you meet these criteria and are eligible for a VA loan.
It will also help your lender determine if you need to pay a VA funding fee, which is a one-time fee that goes directly to the VA to continue the program. Though your cost may vary, most borrowers of VA loans will have to pay this fee. But the COE helps the lender determine how much your fee will be.
Documentation for a COE
Different service members will be required to provide different documentation when applying for their COE. The following types of documents are required for the different service member statuses.
Veteran: copy of your discharge or separation papers (DD214)
Active Service Member: a statement of service — signed by your commander, adjutant, or personnel officer. This should show your name, date of birth, social security number, the date you entered duty, and the name of your commander
Current or Former Activated National Guard or Reserve Member: copy of your discharge or separation papers (DD214)
Unactivated current member of the National Guard or Reserves: a statement of service — signed by your commander, adjutant, or personnel officer. This should include the same information as the active service member’s service statement listed above, as well as your total number of creditable years of service
Surviving Spouse: copy of the veteran’s discharge documents (DD214), plus a completed application for Dependency and Indemnity benefits, death pension and/or accrued benefits, copy of your marriage license, and the veteran’s death certificate
Want more personalized rates?
Get customized rates tailored to your individual mortgage needs.See Today’s Rates
Where to Get a VA Certificate of Eligibility
COEs can be applied for online or by mail.
Some lenders may also be able to help you apply by using the WebLGY system, so be sure to ask your lender about this option.
Applying by mail will take longer than other methods but you can fill out a Request for a Certificate of Eligibility (VA Form 26-1880) and mail it to the address on the form.
Applications can take up to six weeks to process. Asking your lender to apply for the COE on your behalf will typically be the quickest way to process the application.
Benefits of a VA Certificate of Eligibility
A COE is not an approval for a VA loan on its own, but it allows the lender to review your loan approval. It’s the first step to purchasing your own home with a VA loan.
One benefit of the COE is there is no expiration for it unless your service status changes. You may be asked to apply for another one if you were on active duty when you applied and your service has since ended.
A COE can also help you get approved for different types of VA loans including:
- VA purchase loan
- VA cash-out refinance loan
- VA interest rate reduction loan
The requirements for these types of loans through the VA are typically more lenient than banks or credit unions. For example, there is no mandate for your debt-to-income* ratio or a minimum credit score through the VA. Though lenders will likely have minimum credit requirements.
*Debt-To-Income (DTI) ratio is monthly debt/expenses divided by gross monthly income.
Get Started with Homefinity
The VA loan is a great benefit for service members and a chance to purchase a home, reduce an interest rate, or refinance a loan.
Applying for a VA Certificate of Eligibility is the first step toward these goals.
Homefinity can help you figure out if you qualify for a VA loan, and help you through the next steps of the application process.
To move forward with a VA loan application, contact us today to discuss your next steps so that we can help you get the right loan for the right home.
Our professional loan officers will recommend the best options, so you can feel comfortable not only in your home but also with your loan.
A down payment is required if the borrower does not have full VA entitlement or when the loan amount exceeds the VA county limits. VA loans subject to individual VA Entitlement amounts and eligibility, qualifying factors such as income and credit guidelines, and property limits. Homefinity is not affiliated with any government agencies. These materials are not from VA, HUD or FHA, and were not approved by VA, HUD or FHA, or any other government agency.
Photo by Tim Mossholder on Unsplash