As we discussed earlier, the Certificate of Eligibility (COE) is the only document that a lender can use as proof that a veteran is entitled to a VA home loan. It is important to obtain the COE early in the mortgage process. It contains a lot of valuable information that the lender needs to issue VA mortgages.
Perhaps the most important information on the Certificate of Eligibility is the amount of available entitlement. The maximum available entitlement that can be shown on the COE is $36,000. On VA mortgages in amounts greater than $144,000 the veteran may use up to $60,000 of entitlement. However, the COE will never show an entitlement in excess of $36,000. The additional $24,000 is an exception and can only be applied to VA Home Loans in excess of $144,000.
There are two reasons that the COE may show an entitlement of less than $36,000. The first is that the COE was issued before the maximum entitlement was increased by law. The second is that the veteran may have previously used entitlement that has not been restored yet.
The four most recent entitlement changes are listed below:
February 1, 1988: $36,000
October 1, 1980: $27,500
October 1, 1978: $25,000
December 31, 1974: $17,500
If the available entitlement shown on the COE is equal to the maximum amount for the effective date of the COE there is no need to have the COE updated. The lender can assume that the applicant has the current maximum entitlement. For instance, if the applicants COE was issued on or after October 1, 1978, but before October 1, 1980 and the entitlement shows $25,000 the lender can currently assume the applicants current eligibility is $36,000.
If the veteran has used entitlement on a previous VA Mortgage and the entitlement has not been restored the amount of the entitlement is reduced by the amount used on the previous loan. The lender has two options in this situation:
Make the loan with the understanding that the VA’s guaranty is reduced to the current entitlement amount.
Have the veteran apply for restoration of the previously used entitlement.
The additional entitlement of up to $24,000 may be used for qualifying VA home loans above $144,000, even if the veteran has no entitlement or partial entitlement. In these situations the lack of full entitlement may result in lenders receiving less than a 25 percent guaranty from VA. It is the lender’s responsibility to ensure they are able to sell their loan on the secondary market.
Conditions that the lender and veteran must comply with are listed on the COE. The following list displays the conditions shown on the COE and what the lender should do if the condition is checked on the COE.
Condition:
Valid unless discharged or released subsequent to date of this certificate. A certification of continuous active duty as of the date of note is required.
What to do:Ensure the veteran is still on active duty before closing the loan. If the veteran is discharged or released prior to loan closing, request a new eligibility determination from VA.
Condition:
Excluded entitlement previously used for VA LIN [number] as shown herein is available only for use in connection with the property which secured that loan.
What to Do:
If the entitlement used for the prior loan identified in this condition is needed for the proposed loan, ensure the proposed loan will be secured by the same property as the prior loan.
Condition:Entitlement has been used for manufactured home purposes. Remaining entitlement for additional manufactured home use is: $ [amount].
What to Do:
If the proposed loan involves a manufactured home, adhere to the entitlement limit indicated.
Condition:
Not eligible for any loan to purchase a manufactured home unit until veteran disposes of unit purchased with manufactured home loan number VA LIN [number].
What to Do:If the proposed loan involves a manufactured home, ensure that the veteran has disposed of the unit indicated.
Condition:Entitlement previously used for VA LIN [number] has been restored without disposal of the property, under provision of
38 U.S.C. 3702b(4). Any future restoration requires disposal of all property obtained with a VA loan.
What to Do:
This is information for the veteran. The lender need not be concerned if this condition is applicable, as long as the available entitlement shown on the COE is sufficient for the lender’s purposes.
As you can see, the COE has a lot of important information on it. The most important information on the Certificate of Eligibility is the entitlement amount. I can not stress the following point strongly enough:
Get a Certificate of Eligibility as Early in the Mortgage Process as Possible if you want a VA Home Loan!
