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VA loan | How to read the VA Certificate of Eligibility (COE)

Jim Quist Mar 30, 2024 5:00:00 PM
VA loan Certificate of Eligibility

In this article, I’ll show you how to read and understand the Certificate of Eligibility (COE) quickly.

This information will help you determine whether you’re eligible for a VA loan to buy a home with no down payment.


What is a VA Certificate of Eligibility (COE)?

The Certificate of Eligibility (COE) for a VA loan is an official document issued by the Department of Veterans Affairs (VA) that confirms a veteran's eligibility for a VA home loan.

It outlines the veteran's entitlement amount, any previous VA loans charged to entitlement, funding fee exemption status, and any special conditions related to their eligibility.

Lenders use the COE to verify a veteran's eligibility for a VA loan. Your mortgage lender can order your COE with your permission, or you can order it directly from the VA. 


How to read the Certificate of Eligibility

Our customer Mason planned to use a VA loan to buy a home in January. Using his COE as an example, I’ll explain five items that affect your eligibility. They are:

  • 1. Entitlement Codes

  • 2. Funding Fee

  • 3. Prior VA Loans Charged to Entitlement

  • 4. Entitlement Amount

  • 5. Conditions


Mason’s Certificate of Eligibility:

VA Certificate of Eligibility Example 1

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1. VA Entitlement Codes

The COE contains specific entitlement codes that indicate the type and amount of entitlement a veteran is eligible for.

The entitlement code affirms your military service. Match the code on your COE to the service period on the chart below.

Then go to the VA’s website for details about your service era and ensure you meet the eligibility requirements.

Here are the eleven entitlement codes and their matching service periods.


VA Entitlement Codes


Mason’s VA entitlement code is 10 - Gulf War. He fulfills the service time requirements because he was on active duty during wartime for 24 consecutive months.


2. VA Funding Fee

The VA funding fee is a one-time fee paid to the Department of Veterans Affairs (VA) by most veterans or service members who obtain a VA home loan. 

The VA funding fee can vary depending on several factors, including the type of VA loan, the veteran's military service history, and the down payment amount.

Some veterans are eligible for a funding fee exemption. In our example, Mason is non-exempt, he must pay the funding fee.

Borrowers typically roll the funding fee into the total loan amount to reduce the cash needed to buy a home.   


3. Prior VA Loans Charged to Entitlement

The "Prior VA Loans Charged to Entitlement" section of the COE refers to the veteran's previous VA home loans. It outlines your VA loan usage, including any outstanding or paid-off VA loans. 

Section 3 on your COE is where the VA tracks your "entitlement charged," the amount of entitlement in use on existing VA loans.

If you know how much VA entitlement you’re using, you can quickly figure out how much entitlement you have remaining for your next VA Loan.


Mason took out a $300,000 VA loan on July 12, 2016. His loan is still active, and he used $75,000 of his VA entitlement.


4. VA Entitlement Amount

The "VA Entitlement Amount" on the Certificate of Eligibility (COE) refers to the remaining portion of a veteran's entitlement that can be used towards obtaining a VA home loan.

Section 4 is where you figure out if you have enough entitlement for a zero-down VA Loan.


Before we calculate Mason’s entitlement, let me explain what the VA means by, “This veteran’s basic entitlement is $0*. Total entitlement charged to previous VA Loans is $36,000*.”


VA Entitlement Amount


Mason’s entitlement is not $0*, and he didn’t charge $36,000* of his entitlement to previous VA Loans. The asterisks next to the $0* and the $36,000* indicate Mason might have more entitlement available.


5. Conditions on the COE

The "Conditions" section on the COE for a VA loan outlines any specific requirements or conditions that may apply to the veteran's eligibility for a VA home loan.

The VA adds conditions to section 5 of the COE to spell out particular eligibility requirements.


VA Subsequent Use Funding Fee


One of Mason’s conditions is a “subsequent use funding fee.” This condition tells the lender that Mason must pay a higher funding fee because this is his second VA Loan.


You pay a slightly higher funding fee for every loan after the first one. Exempt veterans never pay a funding fee.

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Restoration of Entitlement on the COE

"Restoration of Entitlement" refers to the process by which a veteran who has used their VA loan entitlement can regain some or all of that entitlement to qualify for a new VA loan.

Our customer Michelle bought her home with a VA Loan in December. I included a copy of her COE below to highlight one more item that could limit your eligibility. 

Take a look at items 6-8 on Michelle's COE.

  • 6. Entitlement Code 05
  • 7. VA Funding Fee Exempt
  • 8. One-Time Restoration of Entitlement

VA Certificate of Eligibility Example 2

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6. Basic Restoration of Entitlement - Code 05

The "Basic Restoration of Entitlement - Code 05" on the COE refers to a specific entitlement restoration available to veterans who used their VA loan entitlement and paid off their previous VA loan in full or sold the property securing the loan.


Michelle’s entitlement code is 05 - Entitlement Restored. Entitlement Restored means she already used her entitlement for a VA Loan, paid off the loan, and asked the VA to restore her entitlement.


You can reuse your VA entitlement indefinitely and buy as many homes as you want using VA mortgages. However, you must pay off the VA loans, sell the properties, and ask the VA to restore your entitlement before reusing it.

If you don't, you will eventually use up all your entitlement, leaving you ineligible for a future VA loan unless you make a substantial down payment. 

If you plan to use more than one VA Loan, don’t let code 05 limit your eligibility. Borrow a little strategy and know-how from a VA Loan Expert. Contact me for free advice.


7. VA Funding Fee Exemption

"VA Funding Fee Exemption" on the COE refers to the status of a veteran who is exempt from paying the VA funding fee when obtaining a VA home loan.


Michelle is exempt. She didn’t pay a funding fee for her VA Loan.


Veterans who receive compensation, retirement, or active duty pay from the VA for a service-connected disability don’t pay the fee. A surviving spouse of a veteran who died in service or from a service-connected disability is also exempt.


8. Special One-Time Restoration of Entitlement

The designation "Special One-Time Restoration of Entitlement" on a COE signifies a unique circumstance where a veteran has been granted an exception to the standard rules governing entitlement restoration.


Michelle had a VA Loan, paid it off, and asked the VA to restore her entitlement - before she sold the house.

The VA restored her full entitlement, as she requested. She used her restored entitlement to obtain an additional VA Loan to buy property.


The VA will grant a veteran a special one-time restoration of entitlement only once. Afterward, they add the “one-time restoration” condition you see on Michelle's COE. It reads, “Any future restoration requires disposal of all property obtained with a VA loan.”  


Michelle must sell both her properties and give proof to the VA before she asks for the basic restoration of her entitlement, as I outlined in # 6 above.


VA One Time Restoration

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Confirm you're eligible for a VA Loan.

The easiest way to get a copy of your COE is to ask NewCastle Home Loans to do it for you. Call us at 888-610-1112.

Or, if you prefer to do it yourself, visit the VA website:

Visit NewCastle's VA page for more information. Feel free to comment below.

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Jim Quist NewCastle Home Loans
President and Founder of NewCastle Home Loans. Jim has been in the mortgage business for 20+ years.

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