How do you read the Certificate of Eligibility?

To read a COE, focus on five key technical sections: the Entitlement Code (service period), Funding Fee status, Prior Loans Charged to Entitlement, the Basic Entitlement Amount, and any specific Conditions. These sections together determine if you can secure a VA loan without a down payment.

What is Restoration of Entitlement on the COE?

Restoration of Entitlement allows veterans who have previously used their VA loan benefit to regain some or all of their eligibility for a new loan. This typically requires fully repaying the original VA loan and selling the property, though a 'Special One-Time Restoration' exists for specific circumstances.

How can you confirm you're eligible for a VA Loan?

Confirming your eligibility is most easily done by allowing a lender like NewCastle Home Loans to obtain your COE directly from the VA website. You can also apply manually through the VA's eBenefits portal by providing your social security number and proof of service.

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This guide is a practical tool for reading the VA Certificate of Eligibility (COE). Armed with this information, you will be well-prepared to determine whether you can use a VA loan to buy a home without a down payment.

What is a VA Certificate of Eligibility (COE)?

A VA Certificate of Eligibility (COE) is an official document issued by the Department of Veterans Affairs (VA) that proves to mortgage lenders you meet military service requirements for a zero-down VA home loan. It details your available entitlement amount, funding fee exemption status, prior loan usage, and special eligibility conditions.

Veterans can request the COE directly from the VA website or allow their mortgage lender to obtain it. After you apply for a mortgage with NewCastle Home Loans, we can access the VA portal and retrieve your COE in minutes using your Social Security number, date of birth, and authorization.

How to read the Certificate of Eligibility

To read a COE, focus on these key sections:

1. Entitlement Code

2. Funding Fee

3. Prior Loans Charged to Entitlement

4. Entitlement Amount

5. Conditions

Our customer, Mason, used a VA loan to buy a home in January. Using his COE as an example, I’ll explain the five sections that affect eligibility.

Mason’s Certificate of Eligibility:

Sample VA Certificate of Eligibility COE showing entitlement code 10, funding fee status, prior loans, and basic entitlement

1. VA Entitlement Codes

The COE includes an Entitlement Code that specifies the period of military service or the basis for a veteran's eligibility for VA home loan benefits. By identifying your entitlement code, you can understand how your service period aligns with VA loan eligibility requirements.

Below is a list of the eleven entitlement codes and their corresponding service periods:

Code	Era or Category	Service Dates	Minimum Active Duty
01	World War II	Sept 16, 1940 to July 25, 1947	90 continuous days
02	Korean War	June 27, 1950 to Jan 31, 1955	90 continuous days
03	Post-Korean War	Feb 1, 1955 to Aug 4, 1964	181 continuous days
04	Vietnam War	Aug 5, 1964 to May 7, 1975	90 continuous days
05	Entitlement Restored	Not era-specific	Prior VA loan paid off, property sold, or one-time exception used
06	Unremarried Surviving Spouse	Not era-specific	No service requirement (spouse died from a service-connected cause)
07	Spouse of POW/MIA	Not era-specific	Service member was POW or MIA for more than 90 days
08	Post-WWII Peacetime	July 26, 1947 to June 26, 1950	181 continuous days
09	Post-Vietnam	May 8, 1975 to Sept 7, 1980 (enlisted) or Oct 16, 1981 (officer); period ending Aug 1, 1990	181 continuous days, or 24 continuous months
10	Persian Gulf War	Aug 2, 1990 to present	90 continuous days, or 24 continuous months
11	Selected Reserves / National Guard	Not era-specific	6 years in Selected Reserves, or 90 days active duty under Title 10

Any era: less than the minimum still qualifies if you were discharged for a service-connected disability.

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

2. VA Funding Fee

The VA Funding Fee is a single payment required from most veterans or service members when securing a VA home loan.

This fee helps cover the expenses of the VA loan program, which provides advantages such as no down payment and no private mortgage insurance.

The Funding Fee amount depends on several factors:

Loan Type: Purchase, construction, or refinance loans may have varying fee percentages.
First-Time or Repeat Use: First-time VA loan users generally pay a lower fee than those who have used the benefit before.
Down Payment Size: A down payment can lower the Funding Fee percentage.

For a first-time use VA-backed purchase loan:

With a down payment of less than 5%, the Funding Fee is 2.15% of the loan amount.
With a down payment of 5% or more but less than 10%, the fee decreases to 1.5%.
With a down payment of 10% or more, the fee is 1.25%.

Some veterans are exempt from paying the Funding Fee, including those receiving VA compensation for service-connected disabilities.

Borrowers often finance the Funding Fee by including it in the total loan amount, reducing the upfront cash needed to purchase a home.

3. Prior VA Loans Charged to Entitlement

The Prior VA Loans Charged to Entitlement section on your COE details any previous VA home loans you've utilized.

It indicates the amount of your entitlement currently in use, referred to as "entitlement charged." Understanding this helps you determine the remaining entitlement available for future VA loans.

Mason obtained a $300,000 VA loan on July 12, 2016, using $75,000 of his entitlement. Since this loan is still active, the $75,000 remains charged to his entitlement. Mason would subtract the used amount from his total entitlement to calculate his remaining entitlement.

If you have questions or need clarification, schedule some time to talk with one of our VA home loan experts. We're here to help!

4. VA Entitlement Amount

The VA Entitlement Amount on your COE indicates the portion of your VA home loan benefit currently available.

This section helps determine if you have sufficient entitlement for a zero-down payment VA loan.

If your COE states, "This veteran's basic entitlement is $0," you've previously used your basic entitlement, typically $36,000. However, you may still have remaining or "bonus" entitlement available. The VA provides additional entitlement beyond the basic amount, allowing eligible veterans to secure more significant loan amounts without a down payment.

Mason used $36,000 of his basic entitlement for a prior VA loan. His COE now shows "basic entitlement is $0." Despite this, Mason can still use his bonus entitlement to obtain another VA loan without a down payment, subject to lender approval and county loan limits.

VA COE entitlement section showing basic entitlement is $0 and total entitlement charged to previous VA loans

5. Conditions on the COE

The Conditions section on your COE specifies any particular requirements or stipulations related to your VA home loan eligibility.

For instance, if this is your second VA loan, the COE may indicate a "subsequent use Funding Fee," meaning you'll incur a higher Funding Fee than your first loan. It's important to note that veterans exempt from the Funding Fee due to service-connected disabilities are not subject to this charge. Reviewing the Conditions section ensures you know of any obligations or fees associated with your VA loan.

VA COE conditions section showing subsequent use funding fee requirement for previously restored entitlement

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.

Restoration of Entitlement on the COE

Restoration of Entitlement allows veterans who have previously used their VA loan benefit to regain some or all of their entitlement, enabling them to qualify for a new VA loan.

For example, Michelle purchased her home with a VA loan in December. Her Certificate of Eligibility (COE) includes the following items:

6. Entitlement Code 05VA

7. Funding Fee Exempt

8. One-Time Restoration of Entitlement

Sample VA Certificate of Eligibility COE showing entitlement code 05, exempt funding fee status, and one-time restoration

These entries indicate that Michelle has restored her entitlement and is exempt from the funding fee. The "One-Time Restoration of Entitlement" note signifies that she has used this benefit to regain her entitlement for future use.

If you have questions about your COE or the restoration process, schedule a call with a VA home loan expert at NewCastle Home Loans.

6. Basic Restoration of Entitlement - Code 05

Basic Restoration of Entitlement—Code 05 on your COE indicates that you've previously used your VA loan benefit, fully repaid the associated loan, and requested the Department of Veterans Affairs (VA) to restore your entitlement.

This restoration allows you to reuse your VA loan benefit for future home purchases without a down payment. To qualify for this restoration, you must have:

Fully repaid the original VA loan
Sold the property

By meeting these conditions, you can restore your entitlement and use it for subsequent VA loans.

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.

7. VA Funding Fee Exemption

The VA Funding Fee Exemption on your COE indicates that you are not required to pay the VA funding fee when obtaining a VA home loan.

Michelle's COE shows she is exempt from this fee, meaning she did not pay it for her VA loan.

Veterans who receive compensation, retirement, or active duty pay from the VA for a service-connected disability are exempt from the funding fee. Additionally, surviving spouses of veterans who died in service or from a service-connected disability are also exempt.

8. Special One-Time Restoration of Entitlement

The Special One-Time Restoration of Entitlement designation on your COE signifies that the VA granted you an exception to the standard rules governing entitlement restoration.

Michelle had a VA loan, paid it off, and requested the VA to restore her entitlement before selling the property. The VA restored her full entitlement, allowing her to use it for an additional VA loan to purchase another property.

The VA grants this special one-time restoration only once. After this, any future restoration requires the disposal of all property obtained with a VA loan.

Michelle must sell her properties and provide proof to the VA before requesting the basic restoration of her entitlement, as outlined in section 6 above.

VA COE conditions section showing special one-time restoration of entitlement under 38 USC 3702b4

If you have questions about your COE or the restoration process, remember that you are not alone. NewCastle Home Loans is here to support you every step of the way, ensuring you feel supported and confident in your home-buying journey.