VA Loans: Eligibility, Entitlement and the COE

What a VA Loan Is

A VA loan is a mortgage made by a private lender and partly backed by the U.S. Department of Veterans Affairs. That backing, called the guaranty, reduces the lender's risk if a borrower defaults. In return, eligible borrowers may get access to lower upfront cash requirements, flexible credit standards and financing with no monthly mortgage insurance.

The VA sets the program rules, issues Certificates of Eligibility and oversees appraisals, but it does not take your application or decide your loan. A lender does that. This site is an independent consumer resource and is not affiliated with the Department of Veterans Affairs or any government agency.

Who May Be Eligible

Eligibility is tied to military service. You may be eligible if you are:

Serving on active duty and have met minimum service requirements
A veteran with a qualifying discharge
A current or former member of the National Guard or Selected Reserve who meets service requirements
The surviving spouse of a service member who died in service or from a service-connected disability, subject to remarriage rules

Service eligibility is confirmed through your Certificate of Eligibility. After that, the lender reviews credit, income, debts and residual income. Every loan is subject to credit approval, and programs vary by borrower, property and investor.

Your Certificate of Eligibility and Entitlement

The COE is the document that proves you can use the benefit. Many lenders can request it electronically in a short time. If records are missing, you may need to provide a DD-214, a statement of service or other paperwork.

Your COE also shows entitlement, which is the amount of guaranty the VA has available for you. Full entitlement gives you the most flexibility. If you have an existing VA loan or lost entitlement in a past foreclosure, you may have reduced entitlement, which can change how a lender structures your next VA loan. Entitlement can usually be restored after a VA loan is paid off and the home is sold.

The Funding Fee

Instead of monthly mortgage insurance, most VA borrowers pay a one-time funding fee. It helps fund the program and can usually be financed into the loan. The amount depends on your type of service, whether you have used the benefit before, the loan purpose and how much cash you put toward the purchase. Veterans receiving compensation for a service-connected disability, and certain others, are exempt. Your Loan Estimate will show whether the fee applies.

The VA Appraisal and Minimum Property Requirements

VA appraisals are assigned through the VA system to an independent appraiser. The appraiser estimates value and checks the home against minimum property requirements so that it is safe, sound and sanitary. Common conditions involve roofs, heating systems, water and sewer service, and deteriorating paint on older homes.

If the value comes in below the contract price, you can ask for a reconsideration of value, renegotiate or cover the gap yourself. VA contracts include an escape clause that lets you cancel without losing earnest money if the value is short.

Refinancing With a VA Loan

VA offers two main refinance paths. The Interest Rate Reduction Refinance Loan, or IRRRL, is a streamlined option for moving an existing VA loan into a new VA loan, often with less paperwork and sometimes without an appraisal. It must give you a net tangible benefit. A VA cash-out refinance lets eligible borrowers replace a current mortgage of any type with a VA loan and may allow taking equity as cash, subject to full underwriting and an appraisal.

Building or Buying Unique Properties

VA loans can be used for condos in VA-approved projects, multi-unit homes you will live in, and new construction. VA construction financing is offered by fewer lenders and requires a builder with a VA builder ID, so many borrowers ask early whether a lender handles it.

Questions to Ask a VA Lender

Ask how many VA loans the lender closes, whether it adds credit requirements beyond VA guidelines, how it calculates residual income and whether it offers the IRRRL and VA construction loans. Veterans can shop VA loans just like any other mortgage, so request Loan Estimates from several lenders and verify each loan officer through NMLS Consumer Access.

Select your state and city to read local VA loan information and connect with a licensed lender who works with military and veteran borrowers.

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