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MORTGAGE KNOWLEDGE CENTER

PenFed Mortgage with Confidence

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JUMBO LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

  1. Home
  2. Mortgage Knowledge Center
  3. Benefits of a Jumbo Loan With a Credit Union

MORTGAGE

Benefits of a Jumbo Loan With a Credit Union

What you'll learn: Why getting a jumbo loan from a credit union has unique advantages.

EXPECTED READ TIME: 9 MINUTES

Updated December 15, 2022

When you are looking for a new mortgage, there are several loan providers. Oftentimes, however, the choice will generally come down to one of three: a traditional bank, mortgage brokers or a credit union. We will introduce the differences between banks, mortgage brokers and credit unions, and in the end, you will see how the advantages of credit unions mean they are likely the best choice for you when you want to obtain a jumbo loan.

Credit Unions Are Nonprofit

Credit unions are similar to banks in that they accept deposits, provide loans and offer other services. However, the most significant difference between banks and credit unions is that credit unions are nonprofit, cooperative institutions set up to serve their members. The credit union’s members receive the benefit of this structure by having a safe place to borrow at lower rates for loans and saving with higher rates paid for their deposits. Banks have shareholder owners who are looking to make profits from the bank’s operations.

Mortgage brokers will work with borrowers to find good deals on loans (usually from banks or other financial institutions). However, brokers are third-party middlemen and, therefore, add an additional fee for their services on top of the lender’s profits. The shift from for-profit to nonprofit changes the focus from appeasing shareholders with profits to providing better customer service and returns for the members.  Why a Credit Union Could Be a Better Deal Than a Bank

Credit unions put their members first while banks are focused on the shareholders, and mortgage brokers have their own interests in mind. If you have an account with a credit union, you are a member of the credit union, which means you are a part owner of the organization. This results in procedures that are considered more customer-friendly. Credit unions have rules that are usually more forgiving and provide loans to borrowers with lower credit scores. They also attempt to provide solutions if borrowers fall into difficult financial situations.

The biggest difference that the credit union structure has is that fees and interest rates charged for loans will generally be lower. One of the places that banks make profits are with their fees. Loans, monthly service fees and origination fees are profit drivers. The fees assessed by credit unions are generally lower than fees assessed by banks. Other eliminated or reduced banking fees can also add up. For instance, lower or no transfer fees, no ATM fees and reduced overdraft fees, which can be very big with banks, can be a significant source of savings for the credit union member.

Being nonprofit and only having to cover their operating costs, credit unions can usually provide lower interest rates on their loans, including jumbo loans. Borrowers may also have discounts applied for setting up automatic loan payments. Combined, these discounts mean members can save significant amounts over the life of a mortgage.

Credit Union Jumbo Loans

Jumbo loans are loans that exceed the maximum loan limits set by Fannie Mae and Freddie Mac. These limits are set every year, and for 2023, the limit for the majority of the country is $726,200. However, other areas exceed this amount, and there is a map available that shows the maximum loan amounts for the entire country. Fannie Mae and Freddie Mac purchase loans from lenders that are below this limit, and if they don’t conform to the rules of Fannie Mae and Freddie Mac, they are called nonconforming or jumbo loans.

Because jumbo loans do not have to conform to the set rules, there are more options a credit union can provide as your lender. The term of a conventional jumbo loan can be 30 years or shorter if desired, and jumbo adjustable-rate mortgages are possible. ARMs are similar to fixed-rate mortgages, except they have a fixed-rate period for usually between 3 and 10 years, but 15-year ARMs are now available. The fixed rate for an ARM will be lower than a conventional loan, and then when the fixed-rate period expires, the rate will be related to the current market conditions and change on an annual or six-month basis.

Debt-to-income ratio: The monthly total of how much you owe in loans (student loans, credit cards, etc.) divided by income (how much you make working and through other means —investments, alimony, etc.).

Most of the time, a jumbo loan will be harder to qualify for than a conforming loan. Borrowers will usually need a minimum credit score of 680. The higher the score, the lower the rate you will receive for your mortgage. Most borrowers’ debt-to-income ratio, or DTI, should be less than 43%, but some borrowers will require a maximum DTI of 36%. Also, if you are supplying less than a 20% down payment, not only will you have to pay private mortgage insurance, but you may need to also supply a cash reserve of up to one year’s worth of mortgage payments.

If you have either very good or excellent credit, you may find the interest rates for a jumbo loan are lower than those for a conforming loan. Many lenders will keep jumbo loans on their books, not selling them, which makes loans for borrowers with high credit (a perceived lower risk) more competitive.

Lower Rates Mean Qualifying for More

Because credit unions charge lower rates for their mortgages, for the same monthly payment, you are able to purchase a more expensive home with a loan from a credit union. This provides you with more choices. If a seller is not willing to negotiate, you can still purchase the home with a loan from a credit union that you would not be able to afford with a similar-sized bank loan.

Streamlined Finances With Credit Unions

Credit union members have an opportunity to streamline their finances, and this can produce significant savings. Deposits made with a credit union have rates that are generally higher than bank deposits. The rates and fees (especially origination and monthly service fees) that are charged on loans will also be less, so borrowing from a credit union can be significantly cheaper. When this is combined with discounts from automatic payments, the loan process is both cheaper and easier for the credit union member.

Why a Credit Union Could Be a Better Deal Than a Bank

Having members as the focus of a credit union means their interests are considered first. This results in a better experience and a better deal for a mortgage than can be found at a traditional bank. Because jumbo loans have more flexibility, obtaining one through a credit union will allow for the superior service and rates of a credit union to shine through.  

A jumbo loan is the perfect solution for higher-priced properties. And getting one from a credit union can give you more peace of mind.

For more information about PenFed Mortgages:
 

PenFed Mortgage: 

800-970-7766

Get Started

SIMILAR ARTICLES

Best VA Loan Lenders Are Credit Unions | PenFed Credit Union

The best mortgage lenders for veterans can be credit unions. For competitive IRRRL rates, low VA mortgage interest rates & fees, go to a credit union.
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How Is a Jumbo Loan Different than a Conforming Loan? | PenFed Credit Union

Jumbo loans make luxury homes a reality. Read on and find out what a jumbo loan is, what makes a mortgage jumbo, and what the benefits of a jumbo loan are.

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Advantages of a Credit Union Mortgage | PenFed Credit Union

Discover the advantages of Credit Union home loans from low credit union mortgage rates and fees to personalized service, and more products. Read on.
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image

JUMBO LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

Mortgage Topics

  • VA Loans
  • Conventional Loans
  • First Time Homebuyer
  • Home Equity
  • Homebuying 101
  • Checklists
  • Adjustable Rate Mortgages
  • PenFed Top 10
  • Refinance
  • Jumbo Loans
  • FHA
  • Videos

Mortgage Products

  • Mortgage Center
  • Refinancing
  • Home Equity

PenFed HELOC

Rates as Low as % APR* with flexible use of funds

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Disclosures

1Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on discount point, which equals percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, non-conforming, fixed-rate loan. Loan amount of $1,009,000; loan-to-value ratio of 70%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.

*Prime Rate is % as of . The APR for this Home Equity Line of Credit (HELOC) is based on prime plus a margin and can change monthly. Fixed Rate Advances will be amortized over the Fixed Rate Advance Term, with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin, and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes.

  • Annual Fee: Notwithstanding the foregoing, an annual fee of $99 will be assessed on each account anniversary.
  • Home equity lines of credit (HELOC) are variable rate loans and the interest rate is subject to increase after consummation of the loan on monthly basis. Closing costs range between $500 and $8,500 for credit lines of $500,000. Contact a representative for additional details.

Appraisals: PenFed will attempt to establish value via an independent method. If that method is unsuccessful, or the value is not sufficient for the amount requested, an appraisal will be required regardless of CLTV. An appraisal is always required in the following circumstances:

For all loans with a loan amount greater than $400,000.

If an appraisal is required, it must be ordered by PenFed. You will be contacted for authorization and payment prior to ordering. Appraisal fees average $550 to $850 (some run higher).

  • Closing Cost Credit: PenFed will pay most closing costs associated with a home equity line of credit (HELOC), which includes credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. Member is responsible for any city, county, and/or state taxes if the subject property is located in FL, LA, MD, MN, NY, TN, or VA. If an appraisal is required, the member, who is responsible for the fee whether or not the loan closes, will pay the cost.

Interest may be tax deductible, consult a tax advisor for further information regarding the tax deductibility of interest and charges.

Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.

Fixed Rate Advances will be amortized over the Fixed Rate Advance Term with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes and 4.75% for investment properties.

Property Insurance: Property insurance is required.

Multiple PenFed Loans: Multiple PenFed Equity loans and HELOCs are available as long as the member and collateral qualify (except Texas). For Equity loans and HELOCs the total indebtedness cannot exceed $500,000 for all PenFed Equity and HELOCs combined.

PenFed does not lend on:

  • Mobile homes
  • Co-ops or time-shares
  • Properties that are currently listed on the market for sale
  • Commercial property or property used for commercial purposes, even if a residence is part of the property
  • Undeveloped property (land only)
  • Properties with more than 4 units

Properties that are currently under major construction/renovations: Property must be fully livable, with no safety issues. (Examples: no missing rails from stairs/decks, no open walls with wires showing, missing kitchen appliances/counters, missing bath fixtures or unfinished pool).

  • Additional limitations may apply

Home Equity Line of Credit:

  • This Account has a Draw Period of 10 years, followed by a repayment period of 20 years.
  • If only minimum payments are made during the draw period, the loan balance will not decrease.
  • In Texas, the maximum CLTV available is 80% on owner occupied properties. Additional restrictions apply in Texas, so please ask a representative for details.
  • In all other states, the maximum CLTV is 85% on owner occupied properties and second homes. Additional restrictions or requirements may apply based on application characteristics.
  • Property type of Condo has a maximum CLTV of 80%.
  • The maximum CLTV available is dependent on credit qualification.
  • Rates vary depending on owner occupancy and CLTV and other loan criteria.

Minimum Loan Amount Requirements in all States:

  • For an owner occupied property or second home the minimum loan amount is $25,000 and the maximum amount is $500,000 with a CLTV of 85% or less of the fair market value.

Other terms and conditions apply; call 844-918-4307 to speak with a representative for details. All rates and offers are subject to change without notice. To receive advertised product, you must become a member of PenFed.

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This credit union is federally insured by the National Credit Union Administration. Rates are current as of December 2023 unless otherwise noted and are subject to change.

APY = Annual Percentage Yield
APR = Annual Percentage Rate


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The content you are about to view is produced by a third party unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Realty, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Realty, LLC, see the Affiliate Business Arrangement Disclosure.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website.


The content you are about to view is produced by a third party website that is unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Title, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Title, LLC, see the Affiliate Business Arrangement Disclosure.


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