MoneyGeek’s Take

PenFed Mortgage Review

PenFed is one of the country’s leading financial institutions generating over $31 billion in assets and serving 2.7 million customers. It was established in 1935 and has since been providing mortgage and home equity loans, such as Department of Veterans Affairs (VA loans), Federal Housing Administration (FHA) loans, conventional fixed-rate loans, jumbo loans and adjustable-rate mortgages (ARM).

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Last Updated: 10/24/2022
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PenFed offers VA loans, FHA loans, conventional fixed loans and jumbo loans as well as the Power Buyer program, which gives borrowers quick access to equity, allowing you to compete with cash buyers. To qualify for a conventional fixed-rate loan, prospective buyers should have a minimum credit score of 650 and the ability to make a downpayment of at least 5% of the loan’s purchase amount.

At a Glance: PenFed Mortgages


  • PenFed

    • Conventional fixed-rate loan: 5% ARM (Adjustable-rate mortgages): Not disclosed on lender website VA loan: 0% for qualified veterans with their full entitlement FHA loan: 3.5% Jumbo loans: Not disclosed on lender website Power Buyer: Not disclosed on lender website HELOC: Not disclosed on lender website Minimum Down Payment
    • Conventional fixed-rate loan ARM (Adjustable-rate mortgages) VA loan FHA loan Jumbo loans Power Buyer Refinancing options, including HELOC Loan Products Offered
    • All U.S. states, including District of Columbia, Puerto Rico and GuamStates of Operation
    • Yes Online Application

    on PenFed Website

PenFed Mortgage Loan Types, Details and Requirements

MoneyGeek’s PenFed mortgage review breaks down everything you need to know about available mortgage types, application requirements, rates, fees and other borrowing requirements to help you decide if this is the right lender for you.

Mortgage Types Offered

PenFed offers a wide range of mortgage options, namely:

  • Conventional fixed rate-loan
  • ARM
  • VA loans
  • FHA loans
  • Jumbo loans
  • Power Buyer loans

Alternatively, you may choose to refinance your home with Penfed’s home refinancing loans:

  • Rate-and-term refinance
  • VA interest rate reduction loan (IRRRL)
  • Cash-out refinance
  • HELOC

PenFed also has a special refinancing program called VA Streamline Refinance which is the most cost-effective way to refinance a VA loan without having to pay for closing costs.

Mortgage Rates

PenFed offers both ARM and fixed-rate mortgages to borrowers that qualify. A fixed-rate loan means that you’ll pay a constant rate on your mortgage, while an adjustable-rate mortgage fluctuates with the market. To qualify for an adjustable-rate mortgage, you’ll need a minimum credit score of 620. A fixed-rate loan typically requires a higher minimum credit score.

Your actual mortgage rate will depend on your borrower profile, such as your credit score, preferred repayment terms and chosen loan type, among other factors. To get an accurate estimate of your mortgage rates, you may use Penfed’s mortgage calculator or get a quick personalized quote through the company’s website.

Additional Fees

Depending on your chosen PenFed mortgage type, there may be additional fees that you have to be aware of. We’ve listed these down for you:

  • ARM conversion fee of $250: applies when you convert your ARM to a fixed-rate mortgage
  • Rate modification fee of 1% of your loan balance (minimum of $500): applies when you modify your ARM to a lower interest rate
  • Appraisal fee of $300 or more (at cost): charged for Partial Release and/or Private Mortgage Insurance (PMI) cancellation requests
  • Late charges usually at 5% of the principal and interest payment (or as specified in your loan agreement, as permissible by law): charged for delinquent payments
  • Payoff lien release fee (variable rates): third-party fees to cover recording charges assessed by the local land record offices or for charges actually paid to third parties for a lien release or reconveyance services

Minimum Borrowing Requirements

The minimum borrowing requirements vary among PenFed’s mortgage loan products. These are outlined below to help you pick the right loan type to fit your specific needs.

  • Conventional fixed rate-loan

  • ARM

  • Fannie Mae’s HomeReady Program for first-time homebuyers

  • VA loans

  • FHA loans

  • Jumbo loans

  • Power Buyer loans

Conventional fixed loans

For a PenFed conventional loan, you’ll need a credit score of 650 or higher, proof of income (usually one to two months of pay stubs) and at least one year of W2s. You may also be required to provide additional financial verification, such as proof of self-employment income, current debt information and debt-to-income ratio (DTI).

ARM loans

For a PenFed ARM loan, you’ll need a minimum credit score of 620, put in a down payment or have equity if you’re refinancing, have proof of income (typically one to two months of pay stubs) and have at least one year of W2s. You may also be asked to present additional financial verification, such as proof of self-employment income (usually two years of tax returns) and current debt information.

VA loans

To get a VA loan from PenFed, you will need a Certificate of Eligibility (COE), a copy of your discharge paperwork (DD214) if you are a veteran and a statement of service signed by your commander or personnel officer if you are an enlisted military personnel. You will also need a COE if you are the spouse of an active or retired service member who has died in the line of duty or due to a service-related injury.

FHA loans

To qualify for an FHA loan, you’ll need a minimum credit score of 620, proof of income (typically one to two months of pay stubs), document of at least one year of W2s and an acceptable DTI. To confirm that your DTI is within range, you’ll also be required to present your current debt information. Keep in mind that this loan is only available for the purchase or refinancing of a primary residence, and requires a property appraisal made by an FHA-approved appraiser.

Jumbo loans

To qualify, you’ll need a credit score of 700 and above, documentation that you’ve been employed for at least two years, proof of income (typically one to two months of pay stubs), at least one year of W2s, an acceptable DTI and at least six months of installment payments. You may also be asked to present additional financial verification, such as proof of self-employment income (usually two years of tax returns) and current debt information.

Power Buyer

This mortgage loan program requires a full underwriting review, loan documentation approval and other creditworthiness conditions, including no material adverse changes in financial condition, creditworthiness or employment status.

PenFed Mortgage Application Requirements

MoneyGeek advises you to have following documents on hand if you’re planning to apply for a PenFed mortgage loan:

1

Proof of identity, such as your driver’s license

2

A Social Security number

3

Proof of income (all sources). This includes your pay stubs and W2 statements. Self-employed applicants aren’t required to provide W2s, but they must show two years of tax returns (business and personal), 1099s and year-to-date P&L.

4

Proof of assets. This may include bank statements, stocks and securities account statements, proof of ownership or sale of assets and other financial documents.

5

Employment verification

6

Verification of good credit score. A minimum credit score of 620 is required to be eligible for a PenFed mortgage loan.

Is PenFed Right for You?

MoneyGeek’s PenFed mortgage review evaluates the own pros and cons of borrowing from this lender to help you decide if it’s the right option for you.

Who PenFed Is Perfect for

PenFed is a solid option for borrowers who prefer a variety of loan options, but want to avoid the hassle of applying for a loan in-person. Aside from conventional loans like fixed-rate and adjustable-rate mortgages and jumbo loans, PenFed also offers government-backed loans such as VA and FHA loans. PenFed’s clients can easily learn their mortgage rates, prequalify, apply and access various services through the company’s website, online portal and mobile app.

Who Should Not Choose PenFed

You most likely will not qualify for a PenFed mortgage if you have a credit score lower than 620. It also offers a limited number of special programs, namely, first-time homebuyer loans and lender credits. Thus, if you want more options for discounts and better rates, another mortgage lender might be more suited for you.

A PenFed mortgage loan is also not the best option for you are refinancing your home and at the same time are looking for lender credit.

How to Apply for a PenFed Mortgage Loan

Each mortgage lender has its own unique application process. MoneyGeek lists the necessary steps to serve as your guide in applying for a PenFed mortgage loan.

1

Prequalify

With PenFed, the prequalification stage is different from pre-approval. During prequalification, PenFed will only require you to provide your personal and financial details to accurately estimate what you may be able to afford.

2

Fill Out Application Form

Once you’ve found a home you wish to purchase, you can proceed with the application by getting pre-approved for a mortgage loan. Most sellers will only consider an offer from a potential buyer if there is a preapproval letter that proves your financial ability to purchase a home. For this, you’ll typically need to provide the following financial data that can be verified and validated:

  • Proof of your income from all sources, including recent pay stubs (minimum of two months’ worth of data)
  • Proof of your assets, including complete bank statements for all of your accounts for at least two months and any investment account data including 401k statements and retirement accounts
  • Employment verification
  • Credit score verification
  • W2 statements for all borrowers for the last two years
  • A copy of the home purchase sales agreement

There may be additional requirements depending on the loan. For instance, for a VA loan, you'll need to provide your COE. You will also need to lock in your rate.

3

Wait for Pre-Approval

PenFed’s mortgage loan team will review your submitted documents and conduct a hard credit check. You will receive your loan estimate within three business days after filing your mortgage application.

4

Review Loan Agreement

Once PenFed approves your mortgage, it will send your loan estimate agreement which details your projected monthly payment, list of fees and expenses, estimated closing costs, lender fees, discount points, as well as other important things you’ll need, such as appraisals and inspections. Review your loan estimate agreement and make sure you understand all the terms and conditions.

5

Sign Loan Agreement

If all the terms and conditions in your loan estimate agreement are acceptable to you, then you’re ready to sign the document.

6

Closing

PenFed will send you a Closing Disclosure which contains the final and more detailed information about your mortgage loan. You’ll receive this document within three business days of closing. Review this document thoroughly and make sure you fully understand all of the stated financial requirements and closing costs.

7

Make Payments

You may pay your PenFed mortgage through PenFed Online, PenFed Mobile or via mail at PO Box 679260 Dallas, TX 75267.

What to Do if You Are Rejected by PenFed

If your mortgage application with PenFed gets denied, realize that you are not alone in experiencing this setback. Many mortgage applications get rejected for various reasons; some are rejected due to a low credit score or not having enough credit history, while others are weighed down by an insufficient income. All of these factors lead lenders to question a borrower’s creditworthiness and ability to pay their ongoing financial obligations.

MoneyGeek strongly encourages you to reach out to PenFed, either by phone or email, to ask for the exact reason why your mortgage application was denied. You may also discuss with one of their representatives about how to improve your chances of getting approved the next time you apply.

Although it might be tempting to immediately reapply for a mortgage loan either from PenFed or from another lender, we advise you to refrain from doing so without first ensuring that you’ve made significant changes to your application or financial circumstances.

Frequently Asked Questions About Mortgages From PenFed

MoneyGeek has compiled a list of the most commonly asked questions about PenFed’s mortgage loans to help you decide if this lender is best suited to your specific needs and financial circumstances. These will provide you with quick answers regarding the application requirements and process of loan approval.

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