USAA Mortgage, technically known as USAA Bank Home Loans, is one of the larger mortgage lenders out there, though not quite in the top 10.
They’re probably best described as a top 25 mortgage lender, but they’ve got a great website (per my opinion) and good customer service, per J.D. Power, so I figured it would be prudent to take a closer look.
For the record, USAA stands for United Services Automobile Association, an outfit based out of San Antonio, Texas.
The company has that name because they started out in the insurance business, helping military members get auto insurance coverage, then gradually began offering more financial services, including auto loans, personal loans, credit cards, and home loans.
They’re basically a full-fledged bank today, but let’s learn more about those mortgage offerings, including USAA’s mortgage rates, shall we.
What USAA Mortgage Offers
- Mainly conforming loans that meet Fannie/Freddie guidelines
- Also VA loans for military and their families
- Don’t offer FHA or USDA loans
- Must be a USAA member to get a mortgage from them
First off, USAA offer plenty of loan options, including conforming loans that meet the underwriting guidelines of Fannie Mae and Freddie Mac, along with VA loans, which are available for active duty military and veterans and their families.
Additionally, they offer jumbo loans on loan amounts as high as $3 million, which should satisfy most home buyers, and even jumbo VA loans.
Notably absent from their mortgage product lineup are FHA loans and USDA loans, but seeing that USAA is geared toward those who serve, it makes sense.
Speaking of, you need to be a member of USAA in order to get a mortgage from them, which can be obtained if you’re active duty, a veteran, have a spouse that is/was, or a parent that is a USAA member.
Back to those loan programs. In the conforming department, they offer the 97% LTV home loan program that requires just 3% down payment, a home loan offered by both Fannie Mae and Freddie Mac. They actually refer to it as the “30-year first-time homebuyer” loan though it may not actually be limited to just first-timers.
There is an assumption that first-time home buyers can’t come up with large down payments, but this isn’t necessarily true.
It’s also fairly common for these home buyers to put down 20% to avoid mortgage insurance and the higher mortgage rates that come at high LTVs.
While the down payment requirement is low, it is only available on primary residences and the only loan option is the 30-year fixed. Still, that should fit most borrowers’ needs.
If you’re able to put down at least 5%, you can get your hands on a 10-year, 15-year, or even a 20-year fixed mortgage.
If you’re looking for a mortgage with no down payment, USAA also offers VA loans, which don’t require any money down or a minimum credit score. However, USAA seems to require credit scores of 620 or higher to qualify, which is a pretty common threshold.
These are available in a variety of different terms, including 10-, 15-, 20-, and 30-year loan terms. You can also get a 5/1 ARM, which is fixed for the first five years of the loan term before becoming annually adjustable.
The ARM option only appears to be available for VA loans, not on conventional USAA loans.
With regard to their jumbo loans, you can get a 30-year fixed or 15-year fixed if you go the conventional route, with a minimum 20% down payment. This means you also avoid PMI.
If you need a jumbo VA loan, you can go with a 30-year fixed or a 5/1 ARM.
USAA also offers home loans on vacation homes (second homes) and investment properties, which I believe are limited to fixed-rate mortgages only.
USAA Mortgage Rates
- Their advertised mortgage rates seem to be on par
- With what you’ll see elsewhere
- Not noticeably higher or lower than the competition
- So customer service might be the deciding factor
This always seems to be top of mind, but is a moving target as well because mortgage rates can change daily.
But I can say that USAA’s mortgage rates seem to be pretty competitive and on par with what you’ll see advertised elsewhere.
And a sweet spot might be their 20-year fixed, which at the moment, is priced a half a percentage point below the 30-year fixed.
It also comes with a lender credit, whereas the 30-year fixed requires a fraction of mortgage points to be paid to obtain the advertised rate.
If you can afford it (and want to pay off your mortgage earlier), it could be a good choice. Not all lenders offer the 20-year fixed, so USAA has that going for them too.
USAA Mortgage Refinance Options
- You can get a rate and term refinance
- Or a cash out refinance
- They also offer the VA streamline refinance
- But it appears you can only choose a fixed-rate mortgage
Aside from home purchase mortgages, USAA also offers refinance loans if you already have a mortgage and happen to be looking for a lower interest rate or cash out.
They offer both rate and term refinances, which are intended to lower rates and/or shorten loan terms, and cash out refinances, which allow borrowers to tap into their available home equity.
If you’re refinancing a VA loan, they offer Interest Rate Reduction Refinancing Loan (IRRRL) streamlined refinances.
All refinance options offered by USAA Mortgage seem to be limited to 30-year and 15-year fixed mortgages only. It doesn’t appear adjustable-rate mortgages are an option here.
Occasionally, USAA has loan specials, such as no origination fee charged on VA loans, which could sway your decision to use them over a competitor.
Why Choose USAA Mortgage?
- Current members might as well check them out
- And include them in their home loan search
- But you should also gather quotes from the competition
- To ensure you land the lowest rate and closing costs
If you’re already a member of USAA, it’s certainly worth checking out their home loan offerings if you’re in the market to buy a home or refinance your mortgage.
I say that because you should broaden your search in general to see what’s out there, and if it’s with a banking institution you already have a relationship with, the loan process might be a bit smoother.
You may have also established trust, which can be a big plus in terms of putting yourself at ease during what is often a stressful time.
On the other hand, just because you have a checking account or homeowners insurance policy with USAA doesn’t mean you should get your mortgage there too.
There might be a better fit elsewhere based on rate, closing costs, service, or a combination of all those things.
Another plus of going with USAA is that they’re probably well-versed in VA loans, seeing that their members are also members of the military and/or their families.
My assumption is they originate a lot of VA loans for their military family of customers, so if that’s what you’re looking for, it might make for a smoother process compared to a general home loan lender.
Of course, there are lots of other lenders out there that specialize in VA mortgages as well, so they aren’t necessarily the be all, end all for your home purchase or refinance needs.
As always, take the time to shop mortgage rates and look at the interest rate, closing costs, points required, and the track record of the company you ultimately do business with.
While cost is certainly important, a competent lender is a must as well to ensure your home loan actually closes!
(photo: Lars Plougmann)