PenFed Credit Union Lender Review 2024

PenFed operates in all 50 states and Washington, D.C. as well as Guam, Puerto Rico and Okinawa. While PenFed was originally geared toward U.S. military members, anyone can join the credit union simply by opening and funding a savings account with $5, which acts as your member-owner share.

Note that PenFed’s interest rates on mortgage loans are higher than the national average. However, a somewhat higher rate might be worth it if you are looking to work with a nonprofit credit union, want to save money on lender fees or to get a lender credit of up to $2,500 (depending on your loan amount) on a mortgage purchase.

Also keep in mind that while you don’t have to be a PenFed member to apply for a mortgage, you’ll have to join the credit union if you are approved and want to accept the loan.

Loan Types

PenFed provides a variety of mortgage products, including options for first-time home buyers as well as borrowers with less-than-stellar credit. Here are the types of fixed-rate loans available through PenFed:

• Conventional
• Jumbo
• Fannie Mae HomeReady
• FHA
• VA
• Rate-and-term refinance
• Cash-out refinance
• VA interest rate reduction refinance loan (IRRRL)

PenFed also offers variable-rate options including:

• Adjustable-rate mortgages (ARMs) with three-, five-, seven- and 10-year options
• Home equity lines of credit (HELOCs)

While FHA and VA loans are available through PenFed, borrowers interested in loans backed by the U.S. Department of Agriculture (USDA) will need to consider other lenders. Additionally, though PenFed offers refinancing for VA loans, it doesn’t provide this for FHA loans.

Loan Minimum

PenFed loans start at $50,000 for first mortgages, which is helpful if you’re looking for a small mortgage to purchase a less-expensive home. The minimum credit line for a PenFed HELOC is $25,000.

Loan Maximum

You can borrow up to $5 million with a jumbo loan. While this is a relatively high limit, other lenders provide larger loans.

Loan Servicing

Unlike some lenders, PenFed services its own mortgages. This means you’ll make your payments and can direct any questions directly to PenFed.

Here are the basic criteria PenFed requires borrowers to meet.

Minimum Credit Score

For purchase and refinance mortgages—including conventional, FHA and VA loans—you’ll need a minimum credit score of 620. To get approved for a HELOC, your credit score must be at least 660.

Minimum Down Payment

PenFed’s minimum down payment requirements vary by loan type. Here are the percentage amounts you can expect:

• Conventional: 5%
• Fannie Mae HomeReady: 3%
• FHA: 3.5%

If you want to take out a VA loan, the required down payment will depend on your VA entitlement, which is essentially what the VA agrees to pay to a lender if you default on the loan. In some cases, this could be as low as 0%. What you’ll need to put down on a VA loan can also vary with specialty property types, which can involve higher down payments.

Maximum Debt-to-income Ratio

Your debt-to-income (DTI) ratio is the amount you owe on monthly debt payments compared to your income. Mortgage lenders will consider your DTI ratio to determine if you can reasonably manage to take on more debt.

The maximum allowable DTI ratios accepted by PenFed are:

• Conventional: 50%
• FHA: 56.96%
• VA: 65%

Also keep in mind that PenFed requires all mortgages to meet the eligibility requirements set by Desktop Underwriter, which is an automated risk assessment system that Fannie Mae and the FHA (in some cases) use for their mortgage-buying program.

Interest rates on PenFed mortgages are in line with national averages, as reported by Freddie Mac. Annual percentage rates (APR)—which includes the interest as well as any fees—fall below the average APR range for most mortgages.

While PenFed doesn’t charge lender fees, there may be additional fees applicable to your mortgage, such as discount points.

Origination Fees

PenFed doesn’t charge origination fees. This type of fee is typically 0.5% to 1% of your loan amount, so taking out a mortgage through PenFed could help you save a significant amount of money.

Rate Lock Fees

PenFed’s Power Buyer program allows borrowers to lock their rate for 60 days. This lock can be extended for an additional 30 days. PenFed doesn’t disclose if there are any fees involved with locking your rate.

Prepayment Penalties

Like many other lenders, PenFed doesn’t charge any prepayment penalties on its mortgages. So if you decide to sell or refinance your home before you’ve paid off the first mortgage, you won’t have to worry about this extra cost.

You can begin the PenFed application process online. After filling out the initial form with some basic information—including your name, phone number and property location—you’ll be contacted by a loan officer to proceed.

You also have the option to call a toll-free number to ask for a loan officer to call you back. The loan officer you’re assigned to will be the one who will work with you throughout the mortgage process.

Approval and Closing Timelines

If you opt to get preapproved with a PenFed loan officer, you could receive a decision almost instantly, depending on the complexity of your finances.

Closing a mortgage purchase loan with PenFed typically takes around 34 days, which is relatively short when you consider that the average time to close on a home is usually anywhere from 30 to 45 days. For a PenFed refinance, this closing time goes up to 50 days.

If you’re not approved for a PenFed mortgage, it’s a good idea to ask your loan officer what led to the denial. For example, you might need a higher credit score, have too much debt or not earn a high enough income. If you can improve these areas, you’ll have a better chance to qualify with PenFed or other lenders as well as to get a better interest rate.

Another alternative to consider is applying with a creditworthy co-signer or co-borrower. However, asking someone to share responsibility for a mortgage is no small request, especially if that person won’t even be living in the home.

Lastly, make sure to compare your options from as many mortgage lenders as possible to see where you stand and to find the best deal for your situation. You won’t have to worry about hurting your credit while shopping around—submitting multiple applications within 45 days will have the same impact on your score as submitting a single application, according to the Consumer Financial Protection Bureau (CFPB).

PenFed’s Better Business Bureau (BBB) consumer review rating is 1.17 out of 5.0 stars, based on an average of 212 reviews as of January 2023. The BBB has closed 227 complaints about the company in the last 12 months and 550 complaints in the last three years.

The BBB gives PenFed an A+ rating, but keep in mind that this rating isn’t based on customer reviews. Instead, it’s contingent on how the company responds to complaints, its time in business, size and other factors.

The CFPB’s Consumer Complaint Database shows 108 mortgage complaints about PenFed from January 2020 through January 2023. Most had to do with trouble during the application, closing or payment process. The company provided a timely response to all of these complaints but one. Note that the CFPB doesn’t verify the accuracy of consumers’ complaints.

Additionally, while these numbers may seem high, they’re minuscule compared to the number of customers that PenFed works with.

We graded PenFed based on elements that have a meaningful impact on the cost of the mortgage, borrower eligibility requirements, the variety of loan options and the loan features that can impact the homebuying process. Our scoring method is based on the following categories:

• Interest rate: 20%
• Down payment requirements: 20%
• Credit score minimum requirements: 20%
• Alternative credit data considered: 10%
• Preapproval time: 10%
• Closing timelines: 10%
• Loan types: 10%
• Lender discounts offered: 5 bonus points

While there are certainly more features that lenders offer, we chose not to include these in our scoring in order to bring forward lenders that have the most competitive rates and are among the most accessible for borrowers of all financial backgrounds.

Our focus on affordability, accessibility and key features that can impact the homebuying process (like preapproval time and closing timelines) is what we consider reflective of today’s consumer’s top priorities when comparison shopping for mortgage lenders.