How to Read a VA Certificate of Eligibility in 60 Seconds
Alice's Certificate of Eligibility has about forty lines on it. Two of them decide how much house she can buy with nothing down. Alice is a fictional veteran, but her situation comes up often: a veteran or an agent receives the COE, sees the word eligible, and files it away without reading the rest. This article walks through the page the way I read it, in order, so you can do the same in about a minute.
Line one: basic entitlement
Basic entitlement is the portion of VA guaranty a veteran earns through service. It is not cash in an account and it is not a loan amount. It is the guaranty VA offers a lender, and it is what allows a VA loan to be made with no down payment in the first place. On its own, this line tells you the starting point.
Line two: entitlement charged to prior loans
This is the line that matters most. It shows how much of your entitlement is already being used by earlier VA loans.
If it reads zero, Alice has full entitlement. For a borrower with full entitlement, VA does not set a loan limit. What limits the purchase is the usual list: income, credit, debts and the property itself. That is the answer to the question of how much house she can buy with nothing down. The ceiling comes from her qualifying, not from the COE.
If the line shows an amount, an earlier VA loan is still using part of her entitlement. Less is left, and the math on a new purchase changes. A down payment may enter the picture, depending on how much entitlement remains and the price of the home. The time to learn that is before you shop, not after you are under contract.
The prior-loan table
If the entitlement line has a number, the prior-loan table explains it. It lists each earlier VA loan, and it shows whether that loan is still open. Entitlement used by a loan that has been paid off and the home sold can often be restored, and in some situations a one-time restoration is possible even if you kept the home. If you used VA before, this table is where you find out which loan is holding your entitlement.
The funding fee exempt line
The COE indicates whether a veteran is exempt from the VA funding fee. If it says exempt, Alice does not pay the fee. That changes the cost of the loan, so it is worth confirming that the line matches what you expect, and it is worth telling your lender and your agent.
The entitlement code
The entitlement code is a short code that points to the service period or category that established eligibility. It is easy to overlook, but it should make sense for your service history. If something looks off, ask VA about correcting it before it slows down a file.
What to do today
Pull out the COE and do these five things in order:
1. Find basic entitlement.
2. Find entitlement charged to prior loans and note whether it is zero.
3. If it is not zero, read the prior-loan table and identify which loan is using entitlement and whether it is still open.
4. Check the funding fee exempt line.
5. Check that the entitlement code fits your service.
Do that before you write an offer. If you are an agent, ask your veteran client to show you these lines at the first meeting, not just the word eligible.
Where I come in
A COE is one document, and every veteran's file has its own details. If you would like help reading yours, send it to me and I will find the path. I am Jason Sharon, licensed mortgage broker at Home Loans Inc, and you can reach me at 843-LOW-RATE.
Home Loans Inc - Jason Sharon, Mortgage Broker. Company NMLS #1728740, Jason Sharon NMLS #1281448. Equal Housing Opportunity.
Learn more about this loan program: How to Read a VA Certificate of Eligibility in 60 Seconds
