What the VA Certificate of Eligibility Tells a Lender

Certificate of Eligibility

A lender may rely on a VA Certificate of Eligibility (“COE”) as proof the veteran is eligible for a VA home loan. Even though you may eligible for a VA home loan, veterans must still qualify based on income and credit before a VA loan approval is granted.

Amount of Entitlement

Entitlement refers to how much money it will guarantee repayment to lenders in the event that a borrower defaults or stops paying their loan. The amount of available basic entitlement is $36,000. This may be reduced if a veteran has used entitlement before which has not been restored. The amount of basic entitlement will be displayed near the center of the COE. For example it may say:

“THIS VETERAN’S BASIC ENTITLEMENT IS $_____. TOTAL ENTITLEMENT CHARGED TO PREVIOUS VA LOANS IS $_____.”

For certain loans in excess of $144,000, additional entitlement may be available. For loans greater than $144,000, but less than $417,000, the maximum entitlement is 25 percent of $417,000, which equals $104,250. For loans greater than $417,000, the maximum entitlement is 25 percent of the appropriate “loan limit” which can vary by county. For a description of loan limits, as well as the limits for counties, see below.

Please note county limits can change yearly. VA.condo will try to post the limits for each year on our website as they change.

Even though the veteran may have entitlement for certain loans greater than $144,000, the certificate of eligibility will never reflect this potential “extra” entitlement. Instead, an asterisk by the word “available” refers to a note, which explains the possibility of additional entitlement.

Amount of Entitlement

If the veteran previously used entitlement, which has not been restored, available entitlement is reduced by the amount used on the prior loan(s). The lender has two options in this situation:

  • Make the loan knowing that VA’s guaranty is limited to the amount of available entitlement, or
  • Have the veteran apply for restoration of previously used entitlement.

Note: The possible additional entitlement for certain loans in excess of $144,000 may be available even if the veteran has no entitlement or partial basic entitlement. However, in such cases, 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 receive a sufficient amount of guaranty to satisfy secondary market requirements.

Funding Fee (FF) Field and Conditions on VA certificate of eligibility

The “FUNDING FEE” (FF) field appears near the top of the va certificate of eligibility. The exemption status, either “EXEMPT,” “NON EXEMPT,” or “CONTACT RLC,” will appear to the right of this field:

  • EXEMPT status indicates a veteran is exempt from paying the FF.
  • NON EXEMPT status indicates a veteran is not exempt from paying the FF.
  • CONTACT RLC indicates a system-generated determination is not available.

Note: Regardless of the new FF status shown on the va certificate of eligibility, lenders must be sure to read any and all statements appearing in the “CONDITIONS” field, which appears near the middle portion of theVA Certificate of Eligibility:

For VA certificate of eligibility’s with “EXEMPT” status, the following “CONDITIONS” may appear:

  •  “Funding Fee – Veteran is exempt from Funding Fee due to receipt of service-connected disability compensation of $___ monthly.”
  • “Funding Fee – Veteran is exempt from Funding Fee due to receipt of service-connected disability compensation. Monthly compensation rate has not been determined to date.”
  • “Funding Fee – Please fax a copy of VA Form 26-8937 to the VA Regional Loan Center of jurisdiction.”
  • “Funding Fee – Please have the lender contact VA Regional Loan Center for loan processing. Please fax a copy of VA Form 26-8937 to the RLC of jurisdiction.”

ForVA Certificate of Eligibility’s with a “NON EXEMPT” status, the following “CONDITIONS”
may appear:

  • “Funding Fee – Veteran is not exempt from Funding Fee.”
  • “Funding Fee – Veteran is not exempt from Funding Fee due to receipt of nonservice-connected pension. LOAN APPLICATION WILL REQUIRE PRIOR APPROVAL PROCESSING BY VA.”

For VA certificate of eligibility’s with “CONTACT RLC” status, the following “CONDITION” will appear: “Funding Fee – Please fax a copy of the 26-8937 to the RLC of jurisdiction.”

IRRRL Exemption Status

The Funding Fee Exemption Status on IRRRLs is displayed in webLGY at the time the Case Number is ordered.

Exempt Status and Verified Income

Lenders may rely on the “EXEMPT” status appearing next to the “FUNDING FEE” field for verification of FF exemption. Additionally, on COEs with an “EXEMPT” status, lenders may treat any service-connected disability income amount appearing in the “CONDITION” section of theVA Certificate of Eligibility as verified income. There is no need to fax in VA Form 26-8937 to confirm the status or amount showing on the COE.

Additional Conditions Listed On Some VA certificate of eligibility Forms

Additional Conditions that the lender and veteran must comply with are listed on the VA Certificate of Eligibility , under the Conditions heading.

Subsequent Use Funding Fee Condition

The “Subsequent Use Funding Fee” Condition indicates the veteran has used their home loan benefit before, so a higher funding fee is required.

2018-09-21T19:10:08+00:00

About the Author:

Patrick is the CEO and Broker of Record for The Local Realty, Inc. (a boutique lifestyle real estate company) which powers 10+ trademarked brands and 500+ networks including partnerships with 10,000+ referral partners across the world.

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