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VA Entitlement Codes on the Certificate of Eligibility

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The first step a California Veteran will need to complete in securing a VA loan is to obtain your Certificate of Eligibility. The Certificate of Eligibility, also known as the the COE, is a document that the Veterans Adminstration issues, which verifies your eligibility for VA financing. On the COE there is a number listed that is known as the Entitlement Code. The Entitlement Code shows during what period you earned your eligibility, or other alternative ways in which you became eligible for the VA mortgage program. The chart below shows the entitlement codes and what methods of eligibility they represent.

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Subsequent Use of VA Eligibility

A common Entitlement Code is “05”. This means that the Veteran has used VA financing previously and signifies to the lender that a subsequent use VA Funding Fee will be required, unless the COE also verifies the Funding Fee is waived (in the case of a service connected disability).

These periods and methods of eligibility have certain minimum service periods that are required to establish your eligibility for the VA loan program. Each time period has different service requirements. This next chart lists out the dates that define each time period of service as well as their minimum service requirement for those periods.

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Easiest Method for Obtaining your Certificate of Eligibility

While it is possible for a Veteran to retrieve their Certificate of Eligibility directly from the VA, the easiest way to retrieve the COE is through a VA approved mortgage lender. VA approved lenders have direct access to pull COE’s and in many cases can retrieve your COE within seconds of inputting the information into the VA portal. It seems that 50% of the time the DD214 will need to be uploaded, and depending various circumstances, it can take a few days to retrieve the COE. It so easy for a lender to retrieve your COE that contacting a local VA lender should be your first step in the loan process.

Authored by Tim Storm, a California Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. www.CaliforniaVALoanExpert.com. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

How Bonus Entitlement Helps Veterans Buy Homes in California

california homeOne of the most common misconceptions of VA lending guidelines is how a VA Loan can help to buy a home in an expensive state like California. Whether you’re looking to buy near a local ski resort, a beach-side community, or your own slice of heaven somewhere in the middle, the cost of homes is heavily influenced by location. The good news is that the VA hasn’t set a maximum for the amount you can borrow with a VA Loan. The bad news is that there are or course, limits to how much “liability” the VA is willing to take on, and this will indeed affect the amount of money you can borrow. That brings us to the subject of your VA Entitlement.

First, let’s be clear that the Veteran’s Administration (the VA), is not in the business of loaning you money to buy a home. A mortgage Lender will loan you the money to finance your home, and all the VA does is “guaranty” those funds … up to a specific amount. This is what makes the VA Loan so appealing to mortgage Lenders; there’s little risk involved in making a loan with a VA guaranty. But this guaranty is limited to the lesser of 25% of the County Loan Limit or 25% of the actual Loan Amount. In situations where your credit and income are eligible and you know the specific amount of your Entitlement, you can multiply that amount by 4 and you’ll know exactly how much you can pay for a house without any down payment. Conversely, you can start with the Loan Limits for the County in which you’re looking to buy, then divide that amount by 4 and you’ll know precisely how much your Entitlement must be in order for you to buy a home in that County without a down payment. And since the VA Loan Limits are the same Loan Limits as the Federal Housing Finance Agency (FHFA), it’s quite easy to discover the limits in your area. You can find them here.

If you haven’t yet discovered what exactly your Entitlement is, take a look at my previous blog on that topic. In short, there are two types of VA Entitlement; Basic and Bonus. According to the VA website, “The basic entitlement available to each eligible Veteran is $36,000.” Using the 25% rule discussed above, four times that is equal to $144,000 – your maximum purchase price with no down payment. This made a lot more sense in 1944 when the VA first started guaranteeing home loans. However, since that time, both property values and loan limits have increased substantially throughout the country. Now, the Basic Entitlement by itself won’t do much if you’re trying to buy a $500,000 home. This is where the Bonus Entitlement comes in.

va loan calculatorAnd before we go any further, it’s important to know that the eligible Veteran will have their full VA Entitlement determined by adding the Bonus Entitlement to their Basic Entitlement, even if their Basic Entitlement is $0.00. Initially, every eligible Veteran is given sufficient entitlement to adequately cover the VA guaranty up to the FHFA Conforming Loan Limit. For example, The Loan Limit in San Diego County, CA is $612,950. Therefore, the VA guaranty is 25% of that, or $153,237.50. In this situation, if the eligible Veteran has the full $36,000 Basic Entitlement, the Bonus Entitlement is the difference between the VA guaranty and the Basic Entitlement ($153,237.50 – $36,000 = $117,237.50).

How the VA Jumbo Loan Program Works

One final piece on this. If the eligible Veteran is looking to buy a home that is priced above the Loan Limit for the County in which it’s located, they will need to finance 25% of the difference in cash “out of pocket”, as a part of their Down Payment. Remember, the VA Guaranty is only 25%, so they won’t need to cover the entire difference.

Let’s do a quick example:

The eligible Veteran has “Full Entitlement” available to them and is buying a home for $700,000 in a County where the Loan Limit is $636,150.

  • VA Guaranty is 25% of the lesser of the Loan Limit and the Loan Amount ($636,150 ÷ 4 = $159,037.50)
  • 25% of the Purchase Price is equal to $175,000 ($700,000 ÷ 4)
  • Down Payment Required: $175,000 – $159,037.50 = $15,962.50

VA requires that a combination of the VA Entitlement and any cash down payment must equal 25% of the appraised value or the purchase price, whichever is less. So in the example above, the eligible Veteran would like to buy a home that costs more than the 100% financing Loan Limit for that County, and using the Jumbo VA Loan Program, they can still do it using a relatively small down payment.

Despite the rising prices of homes across the state, using a VA Loan to finance your next home purchase, will allow you to keep most of the cash in your pocket and finance the bulk of your purchase price with rates that are still at historically low levels. Don’t hesitate to call if you have any questions. And thank you for serving our country.

Authored by Tim Storm, a California Loan Officer specializing in VA home Loans. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

California Veterans Can Use Their VA Loan Benefits Multiple Times

How many times can a Veteran use the VA home loan benefit? A California Veteran’s home loan benefits with the VA program is an often

vaentitlementmisunderstood concept. Many think that their entitlement is a one and done deal or expires after a certain time period. This is not true. A veteran’s VA home loan entitlement is a lifelong benefit and can be used many times.

How Does the VA Home Loan Entitlement Work?

With a VA loan, the entitlement is an amount that VA guarantees will be repaid to the lender if the veteran defaults. The basic VA entitlement for eligible veterans is $36,000 which means the loan amount would be $144,000. However in many places throughout California and the rest of the country, the VA loan limit is $453,100 or higher. Higher property values and higher loan limits have given rise to a secondary, or “bonus” entitlement for VA loans. For example if the loan amount is $453,100 then the VA would be guaranteeing $113,275. The VA guarantee’s the lower of 25% of the county loan limit or 25% of the loan amount.

If a veteran’s VA loan takes up their full entitlement, then as soon as the veteran pays off their loan they are able to fully restore their loan entitlement so they can use the program again. If their VA loan doesn’t take up their full loan entitlement then they have the possibility to get a second VA loan. In some cases a California Veteran may even be able to purchase a new primary home with no down payment, depending on how much of their entitlement is used on the first loan and how much entitlement is needed for 100% financing on the new loan. (To find out if it is possible to get a second VA loan without paying off your current VA loan, talk to a California VA loan expert.)

Scenario Where a Veteran Would Use a VA Loan Multiple Times

Let’s say an unmarried Veteran buys his first home, a one bedroom VA approved condo in Orange County,  at the age of 25. Later, he gets married and soon has his first child. Having outgrown their one bedroom condo, they find a nice three bedroom detached home. They are able to sell the condo and concurrently purchase the new home. (meaning they close escrow on the sale of the condo at the same time, or within a day or two, of closing on the new purchase.) The lender is able to get the Veterans VA loan entitlement restored quickly through VA once the closing statement on the sale of the condo is available.  Several years later, and a few more kids in the household, it becomes a little crowded once again. Once again they are able to do a concurrent closing on the sale of their 3  bedroom home while purchasing a nice $600,000 home in Orange County with no down payment.  And of course, in high cost counties like Orange and Los Angeles counties, our Veteran may even take advantage of a Jumbo VA loan and buy a home for $800,000, $900,000, or more.

The VA loan is a major benefit to California veterans.  It makes purchasing a home for our veterans much easier and there is no limit to how many times the VA mortgage program can be used.

Authored by Tim Storm, an Orange County VA Loan Officer specializing in VA Loan. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. www.OrangeCountyVALoans.com. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.