In order to get a VA loan, it is important to make sure that the Veteran is first eligible for VA. Often, we are able to get the VA Certificate of Eligibility for the Veteran within a couple minutes online. But, there are times that this information is not available online. Therefore a Veteran has a couple of options: With certain documentation provided up-front, we can request the COE from VA. Also the Veteran may request the COE directly from the Department of Veteran Affairs. Either way, there are at least 6 reasons to obtain the VA COE prior to going under contract. The following can cause delays at minimum, but may also potentially cause a cancelled contract. So, let’s make sure that you are on the right track towards owning a house with the right loan!
6 Reasons to Get Your VA Certificate of Eligibility Prior to Purchase Contract
- Veteran may not have eligibility
- Could be a prior VA loss from short sale or foreclosure
- May have an existing VA loan that will not be satisfied prior to the new purchase
- Surviving spouse may need to go through process of getting eligibility
- Verifies if first time or subsequent use of VA loan
- Determines if Veteran is exempt from the funding fee
Veteran May Not Have Eligibility
Sometimes Veterans have already obtained their COE or used VA entitlement before. If not, Veterans may state they believe they have VA entitlement available. Although, sometimes Veterans are mistaken. One reason a Veteran may not be eligible includes not having enough time and credits in the reserves. For instance, a Veteran may have been a member of the reserves, yet did not complete enough training to qualify for a VA certificate of eligibility. Also, less than honorable discharge would create an issue. If the Veteran or our loan officer feels there is a chance of VA eligibility, we are happy to facilitate the request for the VA certificate of eligibility. We like to make sure of this status very early in the process to prevent issues later. Make sure to have your DD214 or NGB Form 22 (reservists) so that we can request your COE.
Using VA with a Prior Short Sale or Foreclosure
Having a prior VA short sale or foreclosure is not the end of the world. But it does affect a Veteran’s entitlement available. Therefore it could potentially affect the VA loan. Using VA to purchase another home while the Veteran’s entitlement is tied up is called “bonus entitlement“. The amount of the loss that VA incurred determines how much entitlement is used up. The good thing is, assuming the buyer qualifies, VA will allow it’s use again in a very short time after one of these events. Although, there are some areas our loan officers will review with the Veteran after receiving the VA COE. First, the loan amount must be $144,000 or higher when using bonus entitlement. Additionally, at a certain price point, the 100% feature goes away. Then, the Veteran may have a down payment requirement. The amount depends on the purchase price plus entitlement available.
Existing VA Loan Ties Up VA Entitlement
A lot of Realtors, Veterans, and even loan officers don’t realize that having two VA loans at once is very possible. If a Veteran currently has a VA loan which will not be satisfied prior to the new closing, we need to perform research. This research will include obtaining the certificate of eligibility to determine the entitlement available for the 2nd VA loan. These results will determine if down payment is required or not. Plus, if the buyers need to put down some money, it may even be possible to have the seller pay this! Learn more about having two VA loans at once.
Surviving Spouse Process for Being VA Eligible
Under certain circumstances, even the surviving spouse of a deceased Veteran may be eligible for a VA loan. In order to find out, the surviving spouse would go through the same VA certificate of eligibility process that a Veteran would. If the surviving spouse has not applied before, there is some required documentation we will help submit to the VA. Furthermore, keep in mind that just because a spouse is receiving Dependency and Indemnity Compensation (D.I.C.), it does not mean VA eligibility. There are very specific requirements for VA to approve surviving spouses and we are happy to help. It is a great program and benefit if able to use it!
Determines if First Time or Subsequent Use of VA Eligibility
Contrary to what many think, VA home loans may be used many times by Veterans. As mentioned above, there is a limit of having two VA loans at once though. Another big reason to get the COE up-front is that there is a difference in cost between a first time and subsequent use. Most know if they have had a VA loan before, but some forget. So, that is why it is important to verify the difference in cost so it is disclosed correctly to the buyer. You can see the applicable funding fees below.
Determines if Veteran is Exempt From VA Funding Fee
While VA loans require a VA funding fee, there is an exception. This is called being exempt from the VA funding fee. Generally Veterans considered 10% or more disabled by VA receive an exemption from the fee. Waiver of this fee usually saves thousands of dollars in financed costs too! Another reason to receive the VA Certificate of Eligibility prior to contract is that it proves VA disability income if applicable. There are other ways to verify disability income such as a VA disability award letter or by proof of deposit. But this provides another way which may make it easier on the Veteran. Finally, if we know the exact disability income, then we can gross it up to a higher, accurate amount. Grossing up nontaxable income helps borrowers qualify easier for a loan.
3 Key Points to Remember About VA
After reading this article, three things should be abundantly clear. Foremost, VA loans may be the best loan available to qualifying service members, Veterans, or surviving spouses. Next, it makes perfect sense to know a Veteran’s eligibility up-front. By knowing early on, this allows the loan officer to provide the most accurate mortgage options available. Plus, it will reduce the unknown and unnecessary stress to the buyer during the purchase process. Finally, we are the resource for you to call with your VA questions, qualification, or scenarios.
Do you have other questions? Call us 844-340-MOVE (6683) or send us a message below.
Author: Russell Smith
Team Move OVM Financial loan officer success is Russell’s primary focus. He provides the tools and techniques he used as a top producing loan officer. Additionally he offers the Team Move OVM Financial Agent Training Program. Sharing is so important to Russell so he works diligently to be a resource to loan originators and Realtors.