PenFed Mortgage Review

| About PenFed

Pentagon Federal Credit Union (PenFed) is the nation’s second-largest federal credit union, with 1.8 million members and a variety of mortgage products and refinancing options, as well as auto loans, credit cards, checking and savings accounts, and several other financial services. Established in 1935, the company opened its new headquarters in Tysons, Va., in 2016, relocating from Alexandria, Va.

Originally known as the War Department Federal Credit Union, PenFed has a long history of affiliation with and outreach to the military community. However, no military service is required to join or qualify for a mortgage. Applicants must, however, be a member of the credit union in order to get a mortgage through PenFed. This used to require a donation, but the process has recently been streamlined. Membership is available to everyone and can be achieved through:

  • Becoming an employee or a member of a qualifying organization, such as the American Red Cross or the Coast Guard Auxiliary Association
  • Employment with the United States government
  • Working at an eligible location, such as a military post

All members are also required to open a savings account and maintain a balance of at least $5. According to PenFed, this acts as the member’s ownership share.

PenFed’s mortgage volume for 2017 was $3.1 billion.

Working with PenFed

PenFed is licensed in all 50 states as well as Guam, Puerto Rico and Okinawa, Japan. Borrowers can apply for a mortgage online, on the phone and in person at PenFed branches across the country. PenFed has also partnered with Berkshire Hathaway HomeServices to provide mortgage services. PenFed Realty/Berkshire Hathaway offices are located in Virginia, Maryland, the District of Columbia, Delaware, Pennsylvania, West Virginia, Florida, Tennessee, Kansas and Texas.

The minimum credit score to qualify for a mortgage from PenFed is 620, although scores are part of an overall review of income, assets, down payment, outstanding liabilities and financial obligations that helps determine loan qualification and terms. PenFed offers manual underwriting for loan approval, which may help borrowers qualify if they don’t meet the company’s desktop underwriting requirements.

PenFed’s loans cover single-family homes, townhomes, condos, multi-unit properties up to four units, modular homes and manufactured homes on a permanent foundation.

PenFed mortgage prodcuts

PenFed offers a variety of loan options for home purchases, refinancing and home equity loans with competitive rates and accounts backed by a federally insured credit union.


Homebuyers can choose from several 30-year, fixed loan options, VA loans and adjustable-rate loans. PenFed’s 10-year balloon is applicable to investment properties. PenFed does not offer FHA loans.

PenFed’s loans for home purchases include:

Fixed-rate loans:
  • Conforming mortgages (10-, 15-, 20- and 30-year)
  • High-balance mortgages (15- and 30-year)
  • Jumbo mortgages (15- and 30-year)
  • VA conforming mortgages (15- and 30-year)
Adjustable-rate loans:
  • 3/1, 5/1, 7/1, 10/1 conforming mortgages
  • 3/1, 5/1, 7/1, 10/1 jumbo mortgages
  • 5/5 or 15/15 conforming mortgages
  • 5/5 or 15/15 jumbo mortgages


Homeowners looking to refinance their loans can take advantage of a wide range of options, including cash-out refinances for primary homes, second homes and investment properties. Each of PenFed’s mortgage products for purchases is also available for refinances.

Home equity

PenFed provides several ways for customers to tap the equity in their homes. PenFed’s home equity loan calculator can help borrowers determine which option works best for their financial needs.

Home equity loan

PenFed home equity loans allow borrowers to access their available home equity in one lump sum and make fixed payments for a set period of time. Loans are offered from $10,000 to $400,000, with terms of up to 240 months. There are four caveats:

  • The maximum loan-to-value (LTV) is 90% on an owner-occupied home.
  • For homes with LTV ratios of 85.01% to 90%, the loan is capped at $250,000.
  • The maximum LTV is 80% on a non-owner-occupied home. The maximum term for this loan is 144 months.
  • An appraisal is required for loans with a combined loan to value (CLTV) above 80% or for more than $250,000, and this must be paid for by the borrower.

Home equity line of credit

PenFed’s home equity line of credit (HELOC) allows borrowers to access funds as needed and only make payments on the amount used. These loans have variable rates that are subject to change after the loan is finalized. Loan amounts range from $10,000 to $400,000, and PenFed does not charge an origination fee.

Maximum CLTV in all states but Texas is 90% for owner-occupied properties and 80% for non-owner-occupied properties. In Texas, those numbers are 80% and 75%, respectively. For condominiums, the maximum CLTV is 80% in all states. Rates vary depending on owner occupancy and CLTV. PenFed pays most closing costs on HELOCs. An appraisal is required for loans with a CLTV above 80% or for more than $250,000, and this must be paid for by the borrower.

5/5 Home equity line of credit

This type of HELOC offers loans between $25,000 and $400,000, with a rate change every five years and a term limit of 180 months for owner-occupied homes and 144 for rental homes. The maximum LTV is 75% on owner-occupied homes and 70% for homes that are not owner-occupied. PenFed pays most closing costs on HELOCs.

Interest-only line of credit

PenFed’s interest-only line of credit keeps monthly payments low. Loans are available from $10,000 to $400,000 with variable rates dependent on the LTV of the property. Maximum LTV is 85% for owner-occupied homes and 80% for non-owner-occupied properties. PenFed will pay most closing costs associated with an interest-only equity line of credit; however, an appraisal, if needed, must be paid for by the borrower. An appraisal is required if the CLTV is more than 80% or if the loan is for more than $250,000.

PenFed’s special mortgage programs

In lieu of FHA loans, PenFed offers a proprietary conventional loan for first-time homebuyers with a minimum 3% down payment. It also offers the Fannie Mae 30-year Home Ready conventional loan, which also allows 3% down as a minimum.

Through the PenFed Real Estate Rewards program, homebuyers can save 0.5% of their loan amount, up to $20,000, by using a PenFed network real estate agent and a preferred title provider on loans including: fixed, VA or ARM PenFed first mortgage products. Rates vary depending on the borrower’s credit profile and LTV, and this program may require the applicant to pay a one-time origination fee, an appraisal fee and a VA funding fee, if applicable.

Membership in the PenFed credit union also comes with a number of perks, including: discounts on auto and home insurance, home warranty plans, special rates on financial literacy classes and health and wellness discounts.

Members who fall into financial hard times are also able to apply for assistance through a special PenFed program. Hardship assistance may include deferred payments, forbearance agreements, repayment plans or loan modifications.

The mortgage application process

Applicants can apply for membership and mortgages on the PenFed website, in person or over the phone.

A free 60-day rate lock is available, but members must request it. Borrowers provide consent for property appraisals, which are ordered after they receive an “intent to proceed” document. This is the applicant’s official notice that they are moving forward with a PenFed loan.

During the loan process, the member is assigned a loan officer, who will be their main point of contact, and a processor who provides assistance with necessary documentation. Documents are securely uploaded through DocuSign. Once the loan is ready to close, the borrower chooses the time and location for the close, as coordinated with their title company or attorney’s availability.

Pros and cons of a PenFed mortgage

PenFed has a variety of loan programs for nearly every type of borrower, is federally insured by the National Credit Union Administration (NCUA) and boasts an A+ rating with the Better Business Bureau.

Other pros include:

  • No military affiliation is necessary, and membership is easier than ever.
  • Rates are competitive.
  • Numerous brick-and-mortar locations are available for those who want a local branch.
  • No origination fees are required, except for PenFed Real Estate Rewards program.
  • Special programs offer savings and assistance in a variety of areas


  • PenFed does not offer FHA loans. However, it does have two loan conventional loan programs with low down payments for first-time buyers.
  • The minimum credit score requirement is 620, which is higher than the FHA requirement but equal to what is required for many Fannie Mae- and Freddie Mac-backed loans.
  • While it is possible to apply online and paperwork is shared through DocuSign, PenFed’s online capabilities are not as robust as tech-savvy borrowers may want. The website lacks a chat feature, and the Q&A section is limited.

Terms accurate as of the date of publishing.