Understanding the VA Certificate of Eligibility and Entitlement

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If the VA determines you’re eligible for VA benefits, they’ll issue you a VA Certificate of Eligibility. All lenders require this certificate unless you’re using the VA streamline refinance option because you already verified your eligibility. If you don’t have your certificate yet, you’ll need it.

You may secure your VA Certificate of Eligibility from the VA in the mail or online:

• Mailed in request – Complete VA Form 26-1880 and mail it to your regional VA office
• Online – Log into your eBenefits portal and request your COE

VA-approved lenders may also secure the certificate for you – many have instant access to the certificates, which is helpful if you’ve already found a property and need to move fast.

How much Entitlement do Veterans Get?

Today, veterans are eligible for loans up to the county limit. In Colorado, the loan limits vary from $510,400 to $765,600 depending on the county you live. The VA will guarantee 25 percent of the loan amount, which gives lenders the ability to write loans with flexible guidelines. 25 percent is much more than most borrowers put down on a home, so VA lenders are in a good position when lending to veterans.

The entitlement doesn’t mean veterans receive any cash – it’s only a guarantee for lenders should a veteran default on the loan. Lenders feel better writing loans for veterans with no down payment and credit scores as low as 620 because of the guarantee.

Entitlement Isn’t a Guarantee of Loan Approval

Don’t assume if you have a COE that you can get a VA loan. The certificate determines your eligibility; it doesn’t determine if you qualify.

Your qualifying factors control your approval. Lenders must know you’re eligible for the program to determine if you qualify. If you aren’t eligible for the program, they’ll match you with a different loan program that doesn’t have the VA guarantee.

If you are eligible, you must meet the basic requirements including:

• 620 credit score or higher – This varies by lender, some prefer slightly higher credit scores
• 41 percent total debt ratio – This compares your gross monthly income to your monthly obligations, including the new mortgage. Some lenders allow a higher DTI, but you must have more disposable income available to qualify.
• Stable income and employment for the last two years – This shows lenders consistency and reliability. If you don’t have 2 years of stable income, it’s not a deal breaker, but you may have to discuss why you don’t have a stable 2-year history.
• No derogatory credit – If you do have negative credit in the last 12 – 24 months, lenders may require explanations and resolutions to approve the loan.
• Proof of owner occupancy – The VA only offers loans for owner occupancy, not investment or vacation homes.

Reusing your Entitlement

Once you use your VA benefits, they remain tied to that home. You may apply for VA entitlement restoration only if you meet the following requirements:

• You sold the property and paid the loan balance in full.
• A veteran with entitlement assumes the loan and releases you from it. The veteran must use his or her own entitlement to assume the loan, rather than using your entitlement.
• You may request a one-time exception to restore your entitlement without selling the home with current VA financing.

There is no guarantee the VA will restore your entitlement. Complete Form 26-1880 and return it to the VA office that processed your original loan. This is the office that guaranteed the loan and will decide whether they should restore your entitlement.

If you can’t or don’t want to restore your entitlement, you may have some remaining, if you didn’t exhaust 100 percent of your entitlement with the original purchase. As long as the entitlement is at least 25 percent of the new loan amount, you may be able to use your VA entitlement a second time without restoring it.

Replacing a Lost COE

If you lost your Certificate of Eligibility, you may request a replacement by requesting a Certificate in Lieu of Lost or Destroyed Discharge. Visit your local VA office if you lost your certificate.

If you need help with your Certificate of Eligibility, let me know. I have many years of experience working with the VA loan program and am happy to help.

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