As a veteran of the military, you may have the right to obtain VA financing. This loan offers 100% financing with low interest rates and low closing costs. You also get access to flexible underwriting guidelines making it easy to qualify for a loan. Among the requirements you must meet is the need to provide a Certificate of Eligibility. You can obtain this certifciate from the VA. On this certificate is a code. This VA Certificate of Eligibility Entitlement Code is what lets lenders and the VA know how much time you must serve in the military in order to be eligible for VA financing. Not all times served have the same minimum requirements.
What the VA Certificate of Eligibility Entitlement Code Means
The VA Certificate of Eligibility Entitlement Code, which you will find in the upper left corner of the certificate signifies your time of service. This helps to determine the length of time of service you need in order to qualify for VA financing. The minimum service requirements must be met before the VA can approve you for financing. Generally speaking, you need to serve 90 days during wartime and 181 days during peacetime, but there are specific requirements for different eras as determined by the VA.
What the Codes Stand For
The codes you will find on your Certificate of Eligibility range from 01-11 and they correspond to a specific period, including wartime. For example, 01 means World War II; 02 means Korean War; 04 means Vietnam War; and 10 means Gulf War. In addition, 03 means Post Korean wartime; 08 means Post World War II; and 09 means Post Vietnam War. The few codes left do not correspond to a wartime or peacetime; instead, they signify a stage in life. 05 means your entitlement was restored; 06 means you are an un-remarried surviving spouse; 07 means you are a spouse of a POW/MIA; and 11 means you are in the Selected Reserves.
The Required Time to Serve
The lender and the VA know what each code above stands for as well as the amount of time you must serve corresponding to your code. For example, anyone with World War II, Korean War, and Vietnam War must serve a minimum of 90 days to be eligible for VA financing. Anyone who served during peacetime, Post-Korean War, or Post-Vietnam War must serve at least 181 days to be eligible. Finally, anyone serving during Post-Vietnam or during the Persian Gulf must serve at least 2 years for eligibility for a VA loan.
The Amount of Entitlement
Once the lender determines that you served the right amount of time for the period you served, they must determine the amount of entitlement you have. There are two different types – basic and bonus.
Basic entitlement means that you have $36,000 entitlement. Every veteran who meets the minimum time requirements has this entitlement. The VA will guarantee 4 times the entitlement. In this case, this means the VA would guarantee a maximum loan of $144,000. In many cases, this is enough to secure adequate housing. However, some areas are much more expensive than $144,000 for a home. In this case, you need bonus entitlement.
Bonus entitlement is any money you receive beyond the basic guarantee for $144,000. You do not have to do anything special to receive this bonus entitlement, though. If the homes in your area exceed $144,000, you are eligible to use your bonus entitlement. The maximum amount you can receive is based on your county. Most counties have a maximum of $417,000, however. This is also the national conforming limit. In this case, your bonus entitlement would equal $68,250, which is 25% of the full loan amount.
Using Entitlement Twice
In some rare cases, you can use your entitlement twice. Typically, VA loans are strictly for primary residences, but sometimes the VA grants an exception. This is usually the case when your duty or job relocates you. If your current home is too far away for you to commute, you may keep the first home you purchased and use any remaining entitlement you have for a second home. This allows you to rent out your original home or keep it in the event that you were able to move back to it. The choice is yours – the VA does not control what you do with the home.
The bottom line is you have to prove your entitlement in order to secure VA financing. It is not enough to say you were in the service. You have to prove it with your COE as well as the appropriate time served according to your Certificate of Eligibility Entitlement Code. If you are unsure if you served adequate time, you can always request your COE from the VA to determine if you meet the requirements. In some cases, surviving spouses are also eligible, depending on the circumstances. Obtaining the paperwork from the VA will help you determine the next steps. Usually, if you have eligibility, you can start shopping around with different VA lenders. Shopping with at least three lenders helps you to ensure that you find the best interest rate as well as the lowest closing costs. The VA has many lenders throughout the United States, enabling you to shop around to ensure the best deal for yourself.