Pentagon Federal Credit Union, or PenFed, is a financial institution originally created for military and civilian government workers. Membership is now available to anyone who opens a PenFed savings account.
In addition to home loans, the lender offers a full lineup of banking and savings accounts, credit cards, investment services, auto and student loans, and more. PenFed may be a good fit if you have strong credit and you can take advantage of the lender’s discount options.
PenFed overview
Pentagon Federal Credit Union is a full-service credit union established in 1935. Based in Tysons, Virginia, it’s the second-largest federal credit union in the U.S., with over 2.9 million members. PenFed requires you to become a member before applying for its loans or using its banking services. But membership is available to anyone who opens a savings account at the credit union.
PenFed’s TrustPilot rating of 4.6 out of 5 is based on nearly 1,200 reviews, and it has an A+ rating from the Better Business Bureau.
How to qualify for a PenFed mortgage
PenFed’s qualification requirements depend on the type of mortgage you want to get. The credit union typically offers conventional loans for borrowers with a credit score of at least 650. Down payments start at 3%, but you’ll pay private mortgage insurance if the down payment is under 20%.
For 2023, conventional loans can go up to $726,200 (or $1,089,300 in some high-cost areas). If you want to borrow more than the conforming loan limit, you may be able to get a jumbo mortgage. PenFed offers jumbo loans up to $3 million, but qualification requirements are stricter because the lender shoulders more risk. Borrowers need a minimum credit score of 700, down payment of 20% and at least six months’ cash reserves.
Borrowers can also get FHA loans through PenFed, but they’ll need a credit score of at least 620 and a down payment of 3.5%.
Another option with PenFed is the VA loan, available to eligible current and former service members of the armed forces and qualifying surviving spouses. The Department of Veterans Affairs doesn’t set credit score standards for VA loans, but PenFed requires borrowers to have a score of at least 620. There’s no down payment required, and members can roll the VA funding fee into the loan.
How to apply for a PenFed mortgage
You can request a customized rate quote or get preapproved with PenFed online, over the phone or in person at one of the credit union’s branches. No matter which process you choose, you can upload documents online, e-sign paperwork, check your mortgage progress, and talk with a dedicated loan officer throughout the process.
You can use the same application options when you’re ready to submit a mortgage application. PenFed requires you to have the following documents for the preapproval and the official loan application:
- Pay stubs from the previous month.
- A W-2 form from the most recent tax year.
- Two most recent bank and investment statements.
- Tax returns from the two most recent tax years.
Pros of a PenFed mortgage
- Closing credit worth up to $1,500.
- No closing costs on IRRRLs.
- Member discounts available.
Cons of a PenFed mortgage
- Strict eligibility requirements.
- No USDA loans, construction loans, or renovation loans.
- Membership required to apply for a mortgage.
PenFed perks and special features
Here’s a closer look at the major benefits PenFed can offer.
Lender credit
PenFed offers a lender credit for borrowers who get a purchase loan and work with a real estate broker in the credit union’s network. The credit is worth $1,000 for home loans under $700,000, and $1,500 for home loans above that threshold. However, the lender credit isn’t available to Alaska, Iowa, Kansas, Louisiana, Missouri, Mississippi, Oklahoma, Oregon and Tennessee residents.
No closing costs on some refi loans
Another way PenFed can help you save is through its VA Interest Rate Reduction Refinance Loan (IRRRL) program. The credit union will cover most of your closing costs, including credit report fees, flood certification, tax service fees, VA funding fees, title fees, recording fees, and transfer taxes. The funding fee alone could help you save thousands of dollars on a refinance, so be sure to get a quote from PenFed if you qualify for the program.
Member discounts
No matter where you get your mortgage or which real estate agent you close with, you can still get home-related discounts if you’re a member of PenFed. The credit union connects its members with discounts on homeowners insurance and title services, which can knock a few dollars off your closing costs or monthly mortgage payments.
How PenFed could improve
Consider these drawbacks before applying for a PenFed mortgage:
Credit score standards
PenFed’s eligibility requirements are a little stricter than some of its competitors. Borrowers typically need a credit score of at least 650 to get a conventional loan or 620 to get an FHA loan. Some lenders are more flexible and lower the requirement to 620 for a conventional mortgage and 580 for FHA loans. If your credit needs work, you might consider researching other mortgage lenders.
Niche products
PenFed offers a broad selection of standard home loans, including conventional, FHA, VA, jumbo, and home equity lines of credit. But you’ll need to shop with a different lender if you’re interested in a niche product, such as USDA loans, construction loans and reverse mortgages.
Membership requirements
To apply for a mortgage, you must join PenFed Credit Union, which involves opening a savings account and depositing at least $5. While the process is super easy, it might not be a good fit if you don’t want to go through the extra step or don’t want to open a savings account.
Origination fee
Origination fees are fees that some lenders charge for processing the home loan. PenFed charges an origination fee of $995, which will be included in your closing costs. You may save money with a lender that doesn’t charge origination fees.
PenFed customer service and reviews
For routine questions or to get help with a loan application, you can visit PenFed Credit Union at its website, call the main phone line anytime at 800-247-5626 or fill out an online contact form. The credit union also set up specialized phone numbers and postal addresses on its contact page. Additionally, customers can use the lender’s mobile app to track their loan status, make mortgage payments and more.
People who have worked with PenFed tend to give the lender above-average ratings. Trustpilot reviewers gave the lender 4.5 out of 5 stars. Positive reviews focus on strong customer service and competitive mortgage rates. However, some customers also say they received poor customer service from loan officers.
PenFed mortgage alternatives: PenFed vs. Navy Federal vs. USAA
When you’re in the market for a home loan, it’s a good idea to compare rates and fees with multiple lenders. You might find a lower rate that can save you tens of thousands over the loan term. For instance, say two lenders offer rates of 6% and 5.5% on a home loan for $400,000. The lower rate would save you $102 monthly or $36,720 over 30 years.
If you’re considering a mortgage with PenFed, here are two alternatives to compare.
Navy Federal Credit Union, another full-service credit union, offers cash back for partnering with affiliated real estate agents and solid VA loan alternatives. But unlike PenFed, you must be affiliated with the armed forces to become a Navy Federal Credit Union member.
USAA is a full-service bank with the highest J.D. Power mortgage origination survey score. However, its services are available only to current and former military members, and its mortgage menu is limited to conventional loans and VA loans.
Frequently asked questions (FAQs)
PenFed’s qualification requirements vary by loan type. Borrowers need a credit score of at least 620 for a VA loan or FHA loan, a minimum score of 650 for a conventional loan, and a score of at least 700 for a jumbo loan. VA loans don’t require a down payment, but you’ll need to put down at least 3% for a conventional loan, 3.5% for an FHA loan, and 20% for a jumbo loan.
PenFed’s mortgage rates are typically lower than the national average, but the rate you receive depends on several factors. When setting your rate, lenders look at your credit score, debt-to-income ratio, and employment history. In addition, the loan program, type of interest rate, and loan amount also affect the rate you receive.
No, PenFed does not offer reverse mortgages.
