VA loan requirements & Certificate of Eligibility (COE)
VA loans vs. USDA and FHA loans
Homes for the brave.
Military Veterans and those actively serving have earned several significant VA home loan benefits. We understand the value of those benefits and are here to help you maximize them and make the most intelligent decisions for you and your family. To show our support for those who serve, we also offer additional benefits, including no lender fee at close1 and relaxed credit policies.
In 1944, Congress and the Department of Veterans Affairs (VA) developed the enterprising notion to offer military service members a unique, affordable way to secure home loans and build equity at below-market rates. Since then, the VA home loan has been one of the cornerstones of American lending, helping millions of current and former military personnel and their surviving spouses purchase homes, refinance, or obtain a loan for home renovation.
Like FHA and USDA loans, VA home loans are backed by the federal government and can be offered to eligible borrowers without a down payment. They are typically issued by private lenders, including banks, mortgage companies, and credit unions, although in certain circumstances (disabled veterans and Native Americans), the VA provides direct home loans.
Over the years, the VA home loan program has proven an extremely versatile and popular option, paving the way for millions of borrowers to receive the benefits of accessible, affordable homeownership. This is made possible by the federal government’s guarantee to eligible lenders that it will step in and cover a portion of the borrower's debt in the event of a loan default. Essentially, this is a way of transferring risk from the lender to the U.S. government, and it has resounding implications regarding affordability and access. For example, compared to conventional loans, VA government-backed loans have lower minimum credit score requirements, reduced closing costs, and more attractive interest rates.
Suppose you’re a current or former military service member or spouse with relatively sound credit. In that case, it behooves you to take a moment and speak with a trusted lender who’s experienced in handling VA home loans and mortgages. You may be surprised at the savings that await.
VA loan requirements & Certificate of Eligibility (COE)
VA loan requirements are twofold: The VA issues the requirements, and there are the requirements your lender will insist on that relate to credit score, income, and acceptable debt levels.
VA loan eligibility: Service members
The VA loan program is designed to help military personnel and their spouses obtain affordable housing; however, not everyone is eligible. Those interested in getting a VA loan should familiarize themselves with the following requirements:
- Active duty members must have served 90 consecutive days during wartime or 181 days of active service during peacetime.
- Veterans must meet the length-of-service standards, according to VA.gov.
- National Guard or Selected Reserve members must have completed six (6) years of service.
Current or former service members must meet one (or more) of the above conditions to qualify. Once they meet the conditions, they will earn a VA Certificate of Eligibility (COE), which is provided to the lender to receive the full benefits of the VA loan program. Most lenders today have access to the web-based ACE (Automated Certificate of Eligibility) system to expedite COE eligibility.
VA loan eligibility: Surviving spouses
Surviving spouses of veterans who were killed, injured or captured in the line of duty are also eligible. If you’re a spouse looking to procure VA financing, you will need to meet the following requirements:
- You have not remarried.
- Your spouse was killed in the line of duty or from a service-related disability.
- Your spouse was rated disabled and, therefore, eligible for disability compensation at the time of death.
- Your spouse was missing in action or a verified prisoner of war (POW) for at least 90 days.
These requirements should not be considered all-inclusive, and there may be exceptions for spouses not listed here.
Whether you’re a former or current service member or a surviving spouse, if you’re still unclear about VA home loan eligibility requirements or have further questions, make sure to contact the Department of Veterans Affairs.
VA loan limits
While VA loans provide an incredible way for eligible applicants to acquire a home loan, they have historically come with several stipulations, notably loan limits.
Until 2020, VA loan limits were capped at $144,000, thus limiting the amount of funds available to borrowers. Under changes introduced in the Blue Water Navy Vietnam Veterans Act of 2019 (effective in 2020), active-duty military and veterans with full entitlement no longer have a loan cap stipulated by the VA. This is great news for eligible personnel who can now potentially receive expanded financing to cover the home's appraisal value they wish to purchase.
Entitlement
Entitlement is a key feature of any VA loan. You will have full entitlement if you’ve never used the VA loan benefit before and are otherwise eligible. In terms of financing, this means that the VA is willing to guarantee payment of a portion of your loan to your lender if you default. That portion is typically 25% of the loan, which under basic entitlement is $36,000 ($36,000 x 4 = $144,000, the previous loan limit).
In light of 2019’s legislation, eligible service members are (potentially) entitled to receive a loan that matches the 2021 conventional loan limit of $548,250 (with the VA guaranteeing up to one quarter of that amount or $137,062). Of course, to secure such loans, you’ll still have to be approved by your lender and meet their specific requirements.
It’s also important to remember that borrowers are typically limited to securing one VA loan at a time (although there are some exceptions. You might not have full entitlement, but a mortgage specialist can assemble a VA loan max worksheet to help you calculate your max loan amount. The good news is that once borrowers pay off their mortgage in full or sell their home, they can “restore” their entitlement to full value and take out another VA loan (upon lender approval). While not prohibitive, previously defaulting on a VA loan may affect your ability to obtain a new VA loan and impact the entitlement amount.****
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