VA Loan Eligibility and Entitlement – Chapter 2 Summary
The VA Lender’s Handbook provides a lot of fantastic information. This article will summarize Chapter 2 of the Handbook so you can decide if you want to read all of our articles on it or read the chapter itself. We’ve taken the liberty in our articles to sift out all the information that borrowers do not need to know and explain the things that borrowers do need to know in ways that make more sense than the Handbook does. Chapter 2 mainly talks about how a veteran’s eligibility for the VA loan program is established, basic eligibility requirements, and what ‘entitlement’ is and how it can be used.
How a Veteran’s Eligibility is Established
The most important piece to establishing a veteran’s eligibility is called the Certificate of Eligibility (COE). A veteran can apply for a COE on their own before approaching a lender or they can have a lender apply for one on their behalf. Unless you have a specific reason for doing it yourself, it’s usually easier and better to have a lender do it for you since they can do it online and get immediate results. The COE is the only document the lender needs to prove that the borrower is eligible for the VA loan program. If you want to apply for a COE before starting to work with a lender, you can do so by mail by completing VA Form 26-1880. However, the VA encourages borrowers to utilize the online resources available to lenders to do so since it is quicker, easier, and automatic.
To apply for a COE, you need to have proof of your time spent in service. Generally, a copy of DD Form 214, Certificate of Release or Discharge From Active Duty, will be sufficient for discharged veterans that served in the regular military. For veterans that are still on active duty, they need to provide a statement of service signed, “…by, or by the direction of, the adjutant, personnel office, or commander of the unit or higher headquarters they are attached to.” The statement of service must clearly show the veteran’s full name, SSN, and the entry date on active duty. For members of the National Guard or Reserves, there is no specific form that is similar in purpose and scope to the DD Form 214, but discharged members may submit their NGB Form 22, Report of Separation and Record of Service, which will be acceptable to the VA. Active Guards/Reservists are required to obtain a statement of service similar to Active duty regular military.
The time-served requirement is different based on what timeframe the veteran served during, but usually it’s either 90 days if it occurred during wartime, or 181 continuous days of peacetime, if the veteran began service before September 7, 1980, and two years of active duty (if discharged) or at least 90 days during wartime or 181 days during peacetime if still on active duty. For more information, you can read the chapter or read our article on the topic.
What is Entitlement?
Entitlement is how much money the VA is willing to guarantee on your behalf. This amount is shown on the COE and consists of a basic entitlement, usually of $36,000, minus the amount of entitlement used on previous loans. Entitlement doesn’t just stop at $36,000, however. Borrowers also have a basic entitlement of 25% of the loan amount for loans up to $417,000 or more, depending on the county that the borrower is moving to. Veterans entitlement can be restored fully if a previous loan has been completely paid off, and a veteran can purchase a home without using all of their entitlement. This opens up more possibilities for ways that veterans can use their entitlement.
Veterans can get their entitlement restored by applying for it through the VA. Your loan officer can assist with this. If you still have a loan outstanding that is guaranteed by the VA, you will need to pay it off before the entitlement used for it can be restored. If you previously defaulted on a loan that was guaranteed by the VA, in order to get it back you will have to pay the VA back for the amount. If you have questions about your entitlement, you can reach out to us via phone or by contacting us on our website.