Pentagon Federal Credit Union Review 2022: Lender Credit Offered to Mortgage Borrowers With a Membership

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Pentagon Federal Credit Union 2022 Review
Pentagon Federal Credit Union 2022 Review
Editor’s Score: (4.2/5)
Pentagon Federal Credit Union 2022 Review
Editor’s Score: (4.2/5)
  • Minimum Credit Score:
    620
  • Minimum Down Payment:
    0% to 5%, depending on loan type
  • Can Apply Online:
    Yes
  • Operates In:
    All 50 States, Guam, Puerto Rico, and Okinawa

NextAdvisor’s Take

Pros
  • Offers a lender credit up to $2,500 on eligible purchase mortgages
  • Covers closing costs (including the funding fee) on VA IRRRLs
  • Offers a wide selection of home loans plus low-down-payment options
  • Customized rate quote without a credit check
Cons
  • Must join the credit union before taking out a mortgage
  • Doesn’t offer USDA loans, construction loans, renovation loans, and reverse mortgages
  • Higher-than-average amount of consumer complaints per 1,000 loans originated with the CFPB
The Bottom Line

Pentagon Federal Credit Union is a good option for most borrowers because it offers a wide selection of mortgage loans in all 50 states and opens membership for just about anyone. The credit union also provides lender credits and waived fees on certain loans. Keep an eye on the company’s consumer complaints with the CFPB.  

Editorial Independence

As with all of our mortgage lender reviews, our analysis is not influenced by any partnerships or advertising relationships. For more information about our scoring methodology, click here.

PenFed Credit Union Full Review 

Based in McLean, Virginia, the Pentagon Federal Credit Union is a full-service financial institution that was established in 1935. Today, PenFed is the third-largest credit union in the U.S. by asset volume, with a presence in all 50 states, the District of Columbia, Guam, Puerto Rico, and Okinawa. In addition to applying for mortgages, members can open checking and savings accounts, take out various types of loans, apply for a credit card, open a retirement account, and more. You must be a member to get a mortgage (or any other product) from PenFed, but membership is open to anyone with a $5 deposit into a PenFed savings account.   

If you’re in the market for a home loan, here’s what to know about PenFed Credit Union.  

PenFed Credit Union: Mortgage Loan Types and Products

PenFed offers a variety of mortgage options for borrowers looking to purchase a home, refinance a mortgage, or tap their home equity. On PenFed’s menu right now:

When comparing home loans, borrowers can choose the type of interest rate they receive. A fixed-rate mortgage comes with an interest rate that never changes along with predictable principal-and-interest payments. Fixed-rate loans are available at PenFed for terms ranging from 10 to 30 years. 

Adjustable-rate mortgages, or ARMs, come with a fixed rate for a certain amount of time. After the fixed period ends, the rate may go up or down in regular intervals. PenFed offers ARM terms of 3/6, 5/6, 7/6, and 10/6. With a 3/6 term, for instance, the rate stays the same for the first three years. Then, the rate may change every six months.

PenFed also offers jumbo loans, which are mortgages that exceed a dollar amount called the conforming loan limit. The limit is set at $647,200 for one-unit properties in 2022, though it can stretch to $970,800 in certain high-cost areas. For borrowers who want to buy homes priced higher than the conforming limits, PenFed offers jumbo loans up to $5 million.

PenFed doesn’t offer USDA loans, construction loans, renovation loans, or reverse mortgages. 

PenFed Credit Union: Mortgage Transparency

PenFed’s website is easy to use and includes a helpful information center with videos, checklists, calculators, and dozens of articles about the mortgage process and loan products. PenFed doesn’t publish sample mortgage rates on its website, but it does provide customized online rate quotes with no hard credit check. You’ll need to provide your email address, so plan on receiving a few follow-up marketing messages. The rate quote is important because you’ll be able to see if the lender’s a good fit without it affecting your credit. Once you enter a few details, you’ll be able to estimate your interest rate, monthly payment, and closing costs. 

To apply for a mortgage with PenFed, you can fill out an application online, over the phone, or in person at one of the credit union’s branches. The branches are located across 12 states, Puerto Rico, Guam, and Japan. No matter which process you choose, you’ll have the option to upload documents online, e-sign paperwork, check your mortgage progress, and talk with a dedicated loan officer throughout the process.

Be aware of PenFed’s consumer complaint history with the Consumer Financial Protection Bureau (CFPB). The CFPB is the agency responsible for collecting, monitoring, and responding to U.S. consumer complaints about financial services and products. In 2020, the company logged a higher-than-average number of complaints per 1,000 loans originated compared to other lenders we’ve reviewed.  

PenFed Credit Union: Mortgage Rates and Fees 

PenFed Credit Union doesn’t advertise daily interest rates on its website, but customers can get a customized rate quote online, over the phone, or at a bank branch. The rate quote also estimates closing costs, though you may be able to offset them through a lender credit on purchase mortgages. The credit is worth $500 to $2,500 based on the loan amount. 

Here are some of the third-party closing costs borrowers might pay:

Loan qualification requirements vary based on the type of loan you’re looking to get. Borrowers need a credit score of at least 620 and a minimum down payment of either 3% (for first-time homebuyers) or 5% (for repeat buyers) to qualify for a conventional loan. 

You can borrow more than the conforming limit with a jumbo loan up to $5 million — but because the lender takes on more risk with larger loans, they come with stricter requirements. You’ll need to put down at least 10% and have a credit score of at least 680 when borrowing up to $1 million at PenFed. For larger jumbo loans, you’ll need a down payment of at least 20% and a credit score of at least 700. Plus, all jumbo loan borrowers will need at least six months’ worth of cash reserves.

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.

Borrowers can lock in a mortgage rate for up to 180 days, but may pay a fee beyond the 45-day mark. According to a representative, PenFed is currently closing purchase loans within 30 days and refinances within 45 days. 

Refinancing With PenFed Credit Union 

PenFed has three refinance options:

  • Rate-and-term refinance: This option allows you to take out a new mortgage with a new interest rate, loan term, or both. Homeowners often do a rate-and-term refi to save money, switch from an adjustable rate to a fixed one, accelerate their payoff timeline, or get rid of private mortgage insurance.
  • VA interest rate reduction loan (IRRRL): This streamline program is designed to cut down paperwork and help you save money on an existing VA loan. Plus, PenFed will cover funding fees and closing costs on IRRRL refis — which can further save you money.
  • Cash-out refinance: If you’ve built enough home equity, you can borrow money using the equity as collateral. You’ll take out a new mortgage for more than you owe, pay off the old loan, and accept the difference as cash. 

PenFed Credit Union Compared to Other Mortgage Lenders

PenFed Credit UnionNavy Federal Credit UnionTruist Mortgage
Minimum credit score620 for VA and conventionalNot providedNot provided
Minimum down payment0% for VA; 3% or 5% for conventional; 3.5% for FHA0% on some loans0% for VA and USDA; 3% for conventional; 3.5% for FHA 
Where does the lender operate?All 50 states, District of Columbia, Guam, Puerto Rico, and OkinawaAll 50 states and the District of Columbia47 states and Washington, D.C.
Major loan typesConventional, jumbo, VA, adjustable-rate, fixed-rate, refinance, cash-out refinance, home equity lines of creditConventional, jumbo, VA, adjustable-rate, fixed-rate, refinance, cash-out refinance, second-home financing, investment property loansConventional, jumbo, VA, FHA, USDA, construction loans, adjustable-rate, fixed-rate, several refinance programs, home equity loans, home equity lines of credit

How to Shop Around to Get the Best Mortgage Rate

Once a seller has accepted your purchase offer, you can start shopping for a home loan and comparing mortgage rates. It’s a good idea to submit applications to multiple mortgage lenders and compare Loan Estimates, which include the loan’s interest rate, annual percentage rate, closing costs, and other terms. Taking time to compare offers can help you find the best deal, though you may want to use a mortgage calculator to figure out how much you stand to save. 

Take a look at one example: Let’s say you receive two mortgage rate quotes on a home worth $250,000 with a 20% down payment and 30-year term.

Interest rateMonthly principal and interest paymentTotal interest paid over 30 yearsInterest saved
3.5%$898$123,337
3.0%$843$103,601$55 a month or $19,800 over loan term

With a 3.5% interest rate, the monthly principal-and-interest payment comes out to $898. But with a 3.0% interest rate, you save $55 a month on interest costs — or $19,800 over 30 years. 

Editorial Independence

As with all of our mortgage lender reviews, our analysis is not influenced by any partnerships or advertising relationships. For more information about our scoring methodology, click here.