USAA Mortgages

USAA Mortgages

There are many ways for you to afford a house with USAA as your financial backer, so today’s blog is about four different mortgages available to USAA members. Whether you’re a first-time home buyer wanting to put less money down, or you need a loan with no PMI, USAA will have you covered. Once you read the “How-To-Guide: USAA Mortgage blog, you’ll be ready to figure out what type of loan you’d like and how much money you need for the home you want.

*For the best loan options outside of USAA read, “VA Home Loan Guide.”

What is PMI?

Private Mortgage Insurance (PMI) is a monthly insurance payment that you have to make if you can’t put down 20% on a house. PMI insures the mortgage for the lender if the borrower defaults, which is normally around $100-200 per month. PMI is one of the most overlooked costs associated with buying a house that new homeowners don’t think about until it’s too late. I urge you at all times, if you can afford to put 20% down, then you should put the money down without a second thought. PMI is not something you can recoup, so if you pay it, you’ll be out of the money each month that you put into it.

How Do I Avoid Paying PMI?

There are 2 ways to avoid paying PMI, which are applying for a VA loan or putting down 20% of the total cost of the house as cash. This can be unattainable for most of us because if you buy a $300,000 home, you’d have to put $60,000 down as cash. This predicament is also an indication that you might want to look at another house that you can comfortably put the cash down. If you don’t have a healthy cash flow for whatever reason, you should focus on applying for and receiving a VA loan through USAA.

USAA VA Home Loan

There are 3 ways to get a VA home loan through USAA, depending on the length of the loan, which can be a 15-year, 30-year, or a VA 5/1 Adjustable-Rate Mortgage Rate and APR. The most important aspect of a VA loan is you don’t have to put a down payment or pay PMI. The VA not only certifies the loan through the lender, but the power of the federal government backing the loan is enough to avoid PMI. Something to think about. However, if you don’t put a down payment on your home, the monthly payments will be higher.

USAA VA Home Loan Rates and APR Interest Rate APR
30-Year VA Loan Rate and APR 3.375% 3.663 %
15-Year VA Loan Rate and APR 3.125 % 3.670 %
VA 5/1 Adjustable-Rate Mortgage Rate and APR Rates vary and may increase after 5 years 3.664 %

*Whether you’re buying a new home or trying to refinance a home, the link below will give you more information. 

Why Should I Apply For a VA Loan With USAA?

A VA loan is such an incredible opportunity for service members and Veterans to afford a house when we normally wouldn’t be able to afford it. You should apply for a VA loan if you’re unable to put cash down on a home or pay the full 20% that every lender requires. VA loans are also backed by the federal government, so you’re more likely to get a loan if you have lower credit or less cash. You’ll also pay less interest rate with a VA loan over a conventional loan, but you’ll still have to show you can afford this house.

What Is a Funding-Fee?

A funding fee is normally a one-time charge of 1.25% to 3.30% of the total loan amount for the fees associated with the man-hours that USAA would have to put in to get your paperwork done. You’ll get better rates if you serve on active duty than you normally would if you serve in the Guard or Reserves. If you’re a Guardsman or Reservist and have ever been activated to deployment in a war zone, you’d be able to apply under the active-duty rate. If you’ve used your VA Loan before, USAA can use that as a way to determine if you’ve paid your bills on time and get a complete understanding of your financial past, regarding a house.

What 3 Factors play into the Funding-Fee:

  1. Down payment amount (higher the down payment, the lower your fee will be)
  2. Did you serve on active duty?
  3. Did you serve in the National Guard or Reserves?
  4. Have you used a VA loan before?

How Do I Avoid The Funding-Fee?

  1. If you’re a service-connected disabled Veteran, you’d be exempt from the funding fee or your service and sacrifice for your nation.
  2. If you’re a surviving spouse of a veteran who died in service to our nation, you’d be exempt from the funding fee as a way to limit the financial impact on your family.
  3. If you’re a surviving spouse of a Veteran who died due to his/her service-connected disability, you’d also be exempt from this fee.

Why Would A VA Loan Not Be For Me?

As nice as a VA Loan sounds, it’s not the same for everybody because much like fingerprints, not one person has the exact same financial situation. If you can afford to put 20% down a home without compromising your family, then you’d avoid the PMI and funding fee associated with a VA Loan.  If you’re getting a loan to purchase a 2nd home or vacation home, you won’t be eligible for a VA Loan. VA Home Loans require that you move into the house 60 days from the time you’re approved. If you buy a home and plan to move into that home longer than 60 days, then a conventional loan will be your only choice.

How Do I Apply For a USAA VA Home Loan?

There are 2 ways to start the application for the USAA VA Home Loan, and chances are you are already logged into your online account. If you’re not logged in yet, click here to get started with finding the purchase rate and different options available to you. Once you figure out what rate you’re qualified, you should use the USAA Mortgage Calculator to see how much home you can afford with the expected rates and fees. If you are reading this on your phone and just want to call USAA’s Mortgage Team, here it is.

USAA Conventional Loan

A conventional loan from USAA is going to bring higher interest rates and APR than a VA Loan and is set for a 30-year fixed rate. A conventional loan will require a down payment of 20% to avoid the PMI, so if you can’t afford 20% down on the house, a conventional loan will put you in a financial burden. A conventional loan will be a great idea if you can afford 20% down on a home and feel like you’re going to be able to pay off the house early. We will get into USAA refinancing options in another blog since there is a lot of content, but I highly recommend using a conventional loan over a VA loan. With a funding fee for the VA loan and no funding fee for a conventional loan, a conventional loan will end up saving you a lot of money.

USAA Conventional Home Loan Rates and APR Interest Rate APR Points
30-Year VA Loan 3.625% 3.765 % 0.750
First-Time Homebuyer 4.750% 4.915% .0875
30-Year Jumbo Loan 3.375% 3.498% 1.125

What Are USAA Home Loan Points?

A conventional loan has similar interest rates and APR, but they have a point system to help you with either closing costs or interest rates. Each point costs 1% of the overall loan amount that can be either sold to get your closing costs lower or you could buy a point for 1% of the loan amount. For example, if you want to buy a point to lower your interest rate with a house that costs $250,000 and an interest rate of 3.625%, your monthly payment could be reduced from $912.10 to as low as $843.25.

First-Time Home Buyer with USAA

For the 1st-time homeowner who has not owned any private residential property (in the last 3 years in some states), qualify for the benefits of being a new homeowner. This one-time option will allow you to put down as little as 3% cash on your home with a higher interest rate and APR. Similar to the VA loan, you won’t pay PMI. However, this loan needs to be used as your primary residence. If you don’t have a lot of cash, don’t qualify for a VA loan, and this is your first home in the last 3 years, a First-Time Homebuyer Loan is great for you. However, Let me be as clear as possible, if you qualify for a VA Loan, take it! 

 

USAA First-Time Homebuyer APR and Interest rate Interest Rate APR
30-Year First-Time Homebuyer Loan 4.750% 4.915 %

*Be as prepared as possible with your research by researching all competitors, such as Quicken Loans and Lending Tree

USAA 5/1 Adjustable-Rate-Mortgage

an adjustable-rate mortgage (ARM) is when the interest rate of your loan is only guaranteed by the number ratio presented (5/1, in this case). The interest rates given are almost always lower with an ARM. After 5 years for the USAA loan, your interest is dependent on how the economy is performing as a whole. For Example, if we go through another recession (highly unlikely), the banks will be hit harder, and therefore after 5 years, your loan would increase to whatever they wanted. However, if the market is performing better than it was 5 years before, you could receive a lower interest rate. I would only do this if I were still on active duty and thought I might move before 5 years because the interest rate would be in my favor if I PCSed before the rate changes.

USAA 5/1 Adjustable-Rate-Mortgage APR and Interest rate Interest Rate APR
30-Year First-Time Homebuyer Loan Varies per loan 3.65 %

USAA VA Jumbo Loan

A Jumbo Loan is any loan that exceeds $510,400 when purchasing a home, presumably your forever home if you’re spending half a million dollars. If your just buying in an incredibly expensive area, such as Ney York City, Los Angeles, or San Fransico, a high-balance conforming loan will most likely be what you’re looking for. If you’re interested in this type of loan, call, 800-531-0341 and the USAA loan officers will guide through your best choices.

USAA Jumbo Loan APR and Interest rate Interest Rate APR
30-Year First-Time Homebuyer Loan 3.375% 3.642 %

How Much Home Can I Afford?

This should be one of the top questions you need to answer for yourself before you decide to buy a home. The best way to do this is to go to USAA’s Mortgage Calculator and figure out how much cash you can put down on a home to reduce your payments and interest paid. Most of us apply for a 30-year loan to help lower our monthly payments and to be able to afford a bigger home or more property. Try to keep in mind that the longer the loan is, the more you’ll pay in interest over time. My recommendation is to work with the mortgage calculator to determine the shortest possible loan and still be able to make the monthly payments. The best thing to do is contact a Mortgage representative (800-531-0341) to help you navigate your finances and see what they’ll approve you for.

How Long is a USAA Pre-Approval Good For?

The standard length for a USAA Mortgage pre-approval is good for 60 days with an extension of 30 more days if needed. Once you get pre-approved by USAA, they’ll send you an email and update your account on the USAA website. You’ll never have to question how long the pre-approval is good for because it will show you on your account page, once you login to the site. Once the 90 days are done, if you haven’t closed on a home, you’ll have to redo the approval process because the rates may have changed in the past 3 months. Every bank does this because the economic environment of our country is a fluid situation and changes every day.

Conclusion

Choosing a type of mortgage you’d like to apply for is going to be a huge, potentially life-changing decision that you need to consider very carefully. A VA loan from USAA is one of the best options you could ever ask for in a mortgage because you pay no PMI and need nothing down. A conventional loan is the best option for those who have enough money to put down 20% on your home without financially compromising your family. For our active-duty soldiers who move every 2-5 years, a 5/1 Adjustable Rate Mortgage (ARM) is going to be a great option for you. A Jumbo Loan is for people who live in high-cost areas, such as Chicago, New York City, LA, and San Fransico. If you want to borrow more than $510,000, a Jumbo Loan is where you need yo start looking.

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