If you are ready to use your VA benefit and buy a home, you will need your Certificate of Entitlement. You can obtain the certificate yourself or you can ask the lender to obtain it for you. Lenders can usually get their hands on the certificate within a matter of minutes using the VA’s automated system for lenders.
One of the most important items on this certificate is the VA entitlement codes. This is a code on the left side of the form that will say ‘Entitlement Code’ and then a number. Luckily, if you are able to obtain a COE at all, it means that you will be eligible for benefits. The code is just the way to know when or how you obtained the benefits.
The Meaning of VA Entitlement Codes
The code lets the lender know the period you earned your benefits. In some cases, it will show a different reason other than serving in the military. For example, the spouse of Prisoner of War or Missing in Action soldier may be eligible for benefits.
The code that determines the time period you served in the military also helps determine how much time you must serve to be eligible. Certain periods require service for 24 consecutive months, while others only require 181 days of consecutive service.
You’ll likely see one of the following codes:
- 01 – World War II
- 02 – Korean War
- 03 – Post-Korean
- 04 – Vietnam War
- 05 – Entitlement restored
- 06 – Un-remarried surviving spouse
- 07- Spouse of POW/MIA
- 08- Post World War II
- 09 – Post-Vietnam
- 10- Gulf War
- 11 – Selected Reserves
As you can see, not all of the codes pertain to a time period served. Surviving spouses are eligible for benefits. Veterans are also able to restore their benefits, which would result in code 05. Veterans can restore their benefits as much as they want if they sell the home and pay off the loan in full. As a veteran, you can also restore your entitlement one time without selling the original house you bought with your VA benefit.
The Required Time Served
Your VA entitlement codes will determine how much time you must serve in order to be eligible for a VA loan. For any of the following wars, you must have served at least 90 consecutive days:
- World War II
- Korean War
- Vietnam War
- Persian Gulf War
If you served during peacetime in between any of the above wars, you must serve at least 181 days of consecutive service. The only exception to the rule is the Persian Gulf War, as most veterans needed at least 2 years of service or to complete their full called-upon duty in order to be eligible.
The only other time restraints that exist are those that pertain to spouses of POW or MIA soldiers. The veteran must be missing or a POW for at least 90 days before the spouse would be eligible for the benefits.
Qualifying for a VA Loan
Keep in mind that just because you have entitlement doesn’t mean you qualify for the loan. Entitlement means that you are ‘entitled’ to the loan program. Now you have to prove that you can afford the loan you applied to receive.
Luckily, the VA has very flexible guidelines. They don’t focus on credit scores or debt ratios. They put emphasis on the veteran’s disposable income, which is the money left over after paying the monthly bills. The VA believes when a veteran and his family have enough money for daily living expenses, they are less likely to default on their mortgage loan.
That doesn’t mean the VA doesn’t have requirements for the credit score and debt ratio, though. Many lenders require a 620 credit score and allow a debt ratio up to 43%. You may find some lenders that will require higher scores or lower debt ratios though.
The key is to shop around and find the right lender. Your lender will get the Certificate of Entitlement for you, and be able to decipher the VA entitlement codes. Your job is to find the lender that has the best rate and term for the loan that you need.