VA loans are one of the best mortgage options for military members, veterans, and their families. These loans have many advantages for eligible borrowers, like no down payment or private mortgage insurance requirements. Plus, there are many lenders to choose from – both private and specialized lenders are qualified to originate VA loans.
USAA is one lender that specializes in VA loans. But how does USAA perform as a mortgage lender?
In this USAA mortgage review, we discuss why it’s one of the best choices for military homebuyers. We also discuss its loan options in detail, as well as what the company excels at and where they can stand to improve.
What We Look For In A Mortgage Lender
Before we start our review of USAA, you should know the five main criteria we use to evaluate a mortgage lender:
Home Loan Product Selection
The most important measure for reviewing a lender is the mortgage loans they offer. To help you understand the different mortgage products available to you, here’s a breakdown of the most common types:
These loan types are very popular with first-time homebuyers thanks to their predictability. A fixed-rate mortgage has static interest rates that remain the same throughout the life of the loan. This also means your monthly payments will remain the same, making long-term financial planning much easier.
Generally, fixed-rate mortgages are offered in 15-year, 20-year, and 30-year terms.
Adjustable-Rate Mortgages (ARMs)
In contrast to a fixed-rate mortgage, ARMs have interest rates that adjust according to a market index. This adjustment usually happens annually, depending on the index’s performance. However, you have a certain period of fixed mortgage rates at the beginning of your loan before the adjustable period starts.
You can find the length of an ARM’s fixed-rate period and adjustment frequency in the loan title. So if you have a 7/1 ARM, you will have fixed mortgage rates for the first seven years. After the seventh year, your rates will adjust every year.
Some real estate exceeds loan limits set by the Federal Housing Finance Agency (FHFA). Jumbo loans help you buy these real estate properties in exchange for higher interest rates. You can find these loans in fixed-rate and adjustable-rate terms.
The United States government provides several loan products to assist homebuyers who fulfill certain criteria. These loans usually feature lower minimum credit score and down payment requirements. The most prominent government loan programs are FHA loans for low-income borrowers, USDA loans for rural homebuyers, and VA loans for military personnel and their families.
A refinance is when you take out a new mortgage to pay off your existing one. This is usually done to attain better rates or alter your loan terms. If you have some equity in your home, you can also convert it into cash through cash-out refinance loans.
Rate And Fee Transparency
When mortgage shopping, being able to see your mortgage rates and fees easily is essential. This allows you to directly compare offers between several lenders and make an informed decision on which lender offers the best-value loan. For this criterion, we look at how easy it is to receive accurate rate and fee information.
This criterion covers the online services offered by the lender. We mainly consider the application process, but we may also cover other online conveniences that they may offer (e.g. mobile app, online chatbot, document uploading).
We look at whether the lender has any physical branches, as well as if their lending service is available across all 50 states.
Customer service is an essential consideration in deciding which lender will provide your mortgage. We refer to reports from customer satisfaction study organizations like J.D. Power and the Better Business Bureau for this section of our review.
USAA Mortgage Review
The United Services Automobile Association (USAA; NMLS ID# 8722) was founded in 1922 to help military personnel insure their vehicles. The San Antonio-based financial products and services provider has since expanded, providing banking services and credit cards to the United States Armed Forces members and their families.
In addition to their specialized mortgage arm, USAA offers other types of loans too, like personal loans and auto loans. They also had a student loans program, although it was canceled in 2016.
Home Loan Products Offered
While the lender specializes in VA loans for military members, USAA also offers other loan types. Their lineup of home loans consists of:
Conventional 30-year fixed-rate mortgages
VA jumbo mortgages
Conventional rate and term refinancing
VA Interest Rate Reduction Refinance Loan (IRRRL)
VA cash-out refinancing
USAA mortgages start at $50,000. Their VA jumbo loans range from $548,250 to $3,000,000.
USAA borrowers generally need a minimum credit score of 620 and a debt-to-income ratio of 50% to qualify. You must also be a member of the organization. To apply for membership, you must be a veteran or current member of the United States Armed Forces or a spouse/widow of a USAF member.
As a military borrower-focused lender, USAA offers VA loans as their specialty mortgage product. Aside from a conventional fixed-rate VA loan, it also offers 5/1 VA ARMs – ideal for those who don’t plan to stay in their home for long.
USAA also offers a VA Interest Rate Reduction Refinance Loan or IRRRL to help you refinance your current mortgage. In some cases, you can skip property appraisals and credit checks entirely with an IRRL. However, to be eligible for an IRRRL, you must have paid your mortgage on time for the last year.
While USAA doesn’t offer FHA or USDA loans, they do provide 30-year fixed conventional loans with a 3% down payment – no mortgage insurance required. This loan is aimed at first-time homebuyers and military members who have not owned a home in the last three years. To qualify for these conventional loans, borrowers need to complete a homeowner’s education course.
Unfortunately, USAA doesn’t offer any loan options to leverage your home equity, such as home equity loans or home equity lines of credit.
Rate And Fee Transparency
Sample rates for USAA’s core home loans are available on their website. You can easily access information like interest rates, APR, and points for each product. However, these sample rates do not clearly state the loan amount and property location, nor do they take into account your credit score. If you want a customized rate, you need to either start an application or ask a USAA mortgage officer.
You won’t be charged an origination fee as part of your closing costs on a VA loan. However, conventional mortgages have an origination fee worth 1% of your mortgage loan amount. If your loan amount is especially large, you’ll be charged an additional 0.5% on your closing costs. Other closing costs include $24 for your credit report and a $400 to $600 appraisal fee.
To get a VA loan, you need to pay a VA funding fee of 0.5 to 3.6 percent of your loan amount during closing. The funding fee depends on your down payment and whether this is the first time you took out a VA home loan.
USAA Mortgage has built a robust online experience for its borrowers. USAA’s online features allow you to start the application process and close your mortgage without ever having to visit a branch office. You can also upload and sign documents electronically.
Because all borrowers are USAA members, the website pulls from member files to pre-fill most of the application form, expediting the process. Once you complete the application, you will get your mortgage estimate as well as an explainer video that details all the information contained in your application.
With over 12 million members across the country, USAA originates mortgages in all 50 states and the District of Columbia. Some U.S. territories, like Guam and the Virgin Islands, also fall under USAA’s service area.
However, despite a wide service area, there are limited physical locations. This San Antonio-based lender only has 11 brick-and-mortar offices across seven cities in the United States.
According to most accounts, USAA has a shining customer service record. In 2019, reports from the Consumer Financial Protection Bureau showed that the lender received only 49 complaints from the 115,206 loans it originated that year.
While it wasn’t eligible to rank in J.D. Power’s mortgage origination satisfaction study in 2019, USAA scores 900 out of 1000 points – beating out major mortgage lenders like Wells Fargo and Quicken Loans in terms of customer service.
This lender is rated an A- by the Better Business Bureau. This BBB score puts them just slightly below fellow VA mortgage providers Veterans United and Navy Federal Credit Union.
Strengths Of USAA Mortgage
In this section, we discuss what makes USAA one of the prime choices for military homeowners.
Expertise In VA Loans
Because the lender is run by military personnel, USAA boasts an intimate knowledge of all kinds of VA loans – its mortgage division offers VA loan options beyond what most other lenders cover. In addition to fixed-rate loans, USAA offers adjustable-rate loans and refinancing tailor-made for veterans and their families as well.
First-Time Homebuyer Assistance
USAA also offers programs to help new homeowners purchase property. They offer 30-year fixed conventional loans for first-time homebuyers and people who have not owned a home in the past three years. This mortgage is also bundled with an online homeowner education course.
Weaknesses Of USAA Mortgage
There are some caveats to getting a mortgage with USAA – we detail them below:
Service Limited To Military Personnel
USAA is a mortgage lender by service members, for service members. To be eligible for mortgages from USAA, you need to be affiliated with the United States Armed Forces. If you’re not a service member or married to one, you can’t qualify for any loans offered by USAA.
Limited Physical Locations
Unless you happen to live near one of their branches, USAA isn’t the best option if you prefer a face-to-face discussion with a loan officer. USAA only has 11 branch offices located in 7 cities in the entire United States.
While this number is close to the 18 branches owned by Veterans United, they’re both dwarfed by the 300 branches that the Navy Federal Credit Union operates.
If you live nowhere close by, your only option of a mortgage consultation with USAA is through phone or email.
If you’re a military member looking for mortgage loans, USAA is one of your best options. With their expertise in VA home loans, you’ll likely find a mortgage that suits your needs.
Even if you’re not looking for a VA loan specifically, you can take out a low-down-payment conventional loan geared for first-time homeowners at USAA. However, if you aren’t affiliated with the military you may need to look at other lenders.
If you can’t qualify for USAA mortgages or want to look at other options, Wesley Mortgage, LLC is here to assist you! We’ve compiled more lender reviews from the top banks in the U.S. to help you decide which one provides the best value. For a mortgage consultation with one of our experts, contact us today!