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Pentagon Federal Credit Union (PenFed): BiggerPockets Review

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Pentagon Federal Credit Union, more commonly known as PenFed, is a federal credit union headquartered in McLean, VA. PenFed is chartered and regulated under the authority of the National Credit Union Administration (NCUA) and is also federally insured by the NCUA. The bank was established in 1935 and has grown into the second-largest federal credit union in the U.S. Notably, PenFed merged with Valor Credit Union in 2017 and then merged with McGraw-Hill Federal Credit Union in 2019. 

However, PenFed still has a relatively small footprint. The bank has 46 branch locations in 35 cities across 13 states and Washington D.C., as well as military bases in Gurm and Puerto Rico. It’s one of few financial services companies that specializes in serving the military—it competes with other military credit unions, such as Navy Federal Credit Union. 

Since it is a credit union, individuals have historically had to be a member to take advantage of their products. This means having military or government ties, such as being active military or a government employee. However, membership is currently open to everyone.

PenFed has a limited selection of mortgage products, compared to other lenders. Given their military ties, it’s no surprise that they offer Veterans Affairs (VA) loans. These loans are offered for 15- or 30-year rates and are for the military only.

Quick facts 

  • Despite its size as one of the nation’s largest credit unions, the bank has a limited branch network, with just 46 branches in 13 states and D.C. 
  • While PenFed is a credit union that requires membership, they offer the key mortgage products, such as conventional fixed and adjustable-rate mortgages, as well as a host of other other banking products. They do offer VA, but not FHA, loans. They also have a low-down-payment program for first time home buyers. 
  • The bank offers HELOCs and, more importantly, credit lines on rental and investment properties. However, there are restrictions in terms of the number of properties that can be owned. The loan-to-value (LTV) on these products can be upwards of 80 percent, or 90 percent for primary residences. 

PenFed Mortgage Products

PenFed offers the standard products you’d expect for mortgages, including conventional fixed- and adjustable-rate mortgages. They offer 15- and 30-year fixed-rate, VA, and jumbo mortgages. 

The bank gives members a lender credit upon closing on a fixed, ARM, or VA loan. The credit depends on the loan amount, with the maximum credit being $2,500 for loans of $700,000 or above. A $1,000 credit is offered for loans between $200,000 and $699,000, while loans under $200,000 receive a $500 credit. 

On the ARM front, they offer a variety of options, from 3/1 up to 15/15 and anything between, including 10/1, 7/1, 5/5, and 5/1. They also offer unique options for low down payments—however, these are reserved for first-time home buyers. 

The bank’s First Time Home Buyer Advantage allows a three percent down payment and has no income limits or origination fees. This loan also offers two years of job lost protection and a $500 reward after making on-time payments for five years. 

The real draw for real estate investors with PenFed is their home equity line of credit (HELOC), which they offer for rental and investment properties. The HELOCs offered for non-owner occupied properties can have loan-to-value (LTV) ratios of up to 80 percent. The bank offers HELOCs on these properties for $25,000 up to $400,000. Their rate on HELOCs is also below the national average. 

PenFed also offers owner-occupied HELOCs for lower interest rates. On these HELOCs, the bank will offer a line up to $500,000 for a LTV of up to 70 percent. Owner-occupied homes can go up to 90 percent LTV, with lines capped at $250,000. The interest rate on these high-LTV HELCOs are in-line with the rates charged on the non-owner occupied HELOCs.  

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PenFed and Real Estate Investors

PenFed HELOCs tend to be the best option for real estate investors. These HELOCs are for both owner- and non-owner-occupied properties and offer 10-year draw periods of interest-only payments followed by 20-year repayment periods. The interest rate can be switched from variable to fixed, or vice versa, on the entire line or part of it. PenFed will also waive the $99 annual fee for the HELOC if the interest charged for the year exceeds $99. 

The HELOCs offered will generally be for up to 80 percent of loan-to-value, however, borrowers can only have three financed rental properties, said Minnesota rental property investor Tom Nguyen. If an investor has more than three properties financed then a HELOC can only be done on the primary residence, Nguyen said. James Edwards adds that to get a HELOC on a rental property the investment must be held in the individual’s name and one of the three financed pro

Still, getting a HELOC on a rental property at an 80 percent LTV seems advantageous, especially at a rate that beats the broader market. The other loans, including the conventional mortgages, could be worth considering for real estate investors given the lower-than-average rates. 

PenFed Interest Rates

While interest rates for mortgages and other products will vary based on personal financial situations, the PenFed mortgage rates are lower than the national averages, which includes their HELOCs. They are noticeably below the national average interest rates on their shorter-term ARMs, such as the 5/1 and 7/1.  

PenFed Application Process

PenFed has a relatively small selection of loans compared to other lenders. The minimum credit score for mortgages with PenFed is 620 and they allow a maximum debt-to-income ratio of 50 percent. They take into consideration other factors, including income, assets, down payment amount, and debt.

The bank offers a 60-day rate lock period for free on mortgages. They also charge an origination fee, which will vary based on the loan type and amount. PenFed does allow borrowers to save 0.5 percent of the loan amount—up to $20,000—by using a PenFed preferred title provider and real estate agent. 

PenFed doesn’t charge lender fees at closing on home equity products, but other fees could include appraisals and taxes. However, if the line is paid off within three years of closing, PenFed requires that reimbursement be made for closing costs paid on the borrower’s behalf. PenFed does waive escrow fees if the LTV is 80 percent or less. 

PenFed Pros and Cons


  • PenFed offers very competitive interest rates, ranking well below the national averages. 
  • Individuals can get HELOCs on rental properties. As well, borrowers can switch from fixed to variable rate on HELOC products—on all or some of the balance. 
  • The bank will cover the closing costs on HELOC products as well as the annual fee if more than $99 in interest is paid per year. 


  • Potential borrowers have to be a PenFed member given the bank is a credit union—although anyone can become a member. 
  • Smaller branch footprint, with a presence in just 13 states. 
  • Poor reviews of their online platform and “outdated” website.  
  • Reimbursement required for waived closing costs on HELOCs if balance is paid within three years. 

PenFed not right for you? Read more mortgage lender reviews.

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