What Is a COE and Why Do You Need One for a VA Loan

What Is a COE and Why Do You Need One for a VA Loan

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Veterans and active duty service members face all the same challenges as other home buyers. Active duty service members also face unique challenges since they can get deployed or relocated at any time.

Securing a home loan is the one challenge that everyone faces. Many vets and active duty personnel do get an option here that other home buyers do not. They can get VA loans for buying a home.

Of course, getting that VA loan means you must get a COE. If you are starting your home buying journey, you probably just asked two questions.

What is a COE?

Why do I need one for a VA loan?

Let’s jump in and answer those questions.

What Is a COE?

The VA issues a COE or certificate of eligibility to prove that you meet certain requirements for VA-backed home loans.

Broadly speaking, the COE says that you served in an active duty role for a set number of days or months during wartime or peacetime.

It also says that you meet the VA’s basic income and creditworthiness requirements.

Why You Need One for a VA Loan

It is important to note that VA home loans do not come from the VA. Instead, the VA offers a partial guarantee on the loan.

That makes lenders more likely to offer vets and active duty service members these home loans. In some cases, it can also get you better terms on the loan. For example, you might avoid the need for private mortgage insurance and the additional costs associated with that insurance.

It also means that if you get the loan and default, the VA pays the lender a certain amount to cover their losses.

Assisting veterans and active duty service members in buying homes is the purpose of the VA program. The COE ensures that only qualified vets and active duty service members can use the program benefits.

Other Eligibility Requirements

Getting a COE is only the first step in getting a VA home loan. The VA requirements reflect their internal math about acceptable risk in lending. Those minimums also reflect the goal of helping vets and service members buy homes.

Since the actual loans come from traditional lenders, such as banks, that math does not necessarily carry over. Banks can and do impose their minimum requirements.

For example, they might require:

  • a higher credit score
  • more income
  • a better debt-to-income ratio

The banks do not care about the goal of getting vets and service members into homes. They care about how likely you are to pay off the loan. Their minimums reflect that concern.

Parting Thoughts on COEs and VA Loans

What is a COE? It is your first step on the road to securing a VA home loan.

Why do you need one? It tells lenders that the VA will guarantee part of your loan.

Just remember that getting the COE does not guarantee you a loan. Lenders often set more stringent requirements for loans. Getting into the home you want may mean spending some time working on your finances.

7th Level Mortgage specializes in commercial and home loans, including VA loans. To learn more about our loans, contact us today.

7th Level Mortgage is a leading one-stop mortgage company providing deeply informed, custom-tailored assistance with every phase of each mortgage transaction. If you are searching for a home loan in New Jersey, Pennsylvania, Delaware, Maryland, New York, or Florida, please contact us today so that we can determine the best Mortgage Lender to place your loan with and get you the best possible rate and program.