VA Loan Basics: What is the Certificate of Eligibility?
It’s the green flag that starts the race. It’s the bell that kicks off the day. It’s the ticket that lets you into the show.
It’s the Certificate of Eligibility. Known as the starting point of the VA loan process, the COE provides the evidence a lender needs to ensure a buyer meets the VA’s service requirement.
It’s a short and simple document, but the COE can stir up a lot of confusion. Let’s clear up the confusion and tackle some of the most common questions regarding the Certificate of Eligibility.
What is a COE?
Every VA buyer has to meet one of the following service requirements before they can obtain a VA loan:
- 181 days of service during peacetime
- 90 days of service during war time
- 6 years of service in the Reserves or National Guard
- Some surviving spouses of Veterans killed in the line of duty are also eligible
Lenders are required to get proof of a Veteran’s service before they can complete VA loan process. The COE serves as that proof, and tells a lender that an applicant has officially met the minimum service requirements outlined by the Department of Veterans Affairs.
How do you get a COE?
- The lender. Often the easiest and fastest method for obtaining a COE. VA-approved lenders can tap into a special database and obtain a COE in minutes.
- Apply online. A Veteran or service member can access the e-benefits portal to request a copy of their COE.
- Apply via mail. Print off this form and follow the directions on page two.
Does the COE guarantee that my buyer will get a VA loan?
No. The VA loan program offers lenders a loan guaranty. The guaranty covers 25 percent of the loan amount if a buyer defaults on the loan. It’s important to recognize that a guaranty is not the same as guaranteeing that a buyer will obtain financing.
No one is guaranteed to receive a loan through the VA loan program. The COE simply signifies clearing of one hurdle on the track: eligibility by way of the military service requirement. The property still has to measure up to VA criteria, and the buyer’s qualifications (credit score, income, debts) must meet a lender’s standards and pass underwriting. Then, once your buyer has cleared all these hurdles, the VA will guaranty the loan in case of default.
The lender’s automated system can’t determine eligibility. What now?
Sometimes a lender can’t automatically obtain a buyer’s COE. This can happen for several reasons.
- Service members who had a prior VA loan go into foreclosure
- Service members who were discharged under conditions other than “honorable”
- Some Reservists and National Guard members
- Surviving spouses
Don’t panic if your buyer doesn’t receive their COE through the lender’s automated system. This is a relatively common occurrence, and one a VA-savvy lender knows how to handle. Military buyers are usually asked to provide supporting documentation such as a DD214 or points statement, which is sent to the VA for evaluation.
I have a very good VA lender, so if you need a referral please let me know. Then, once you are pre-qualified for a loan, we can start searching for your new home.