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MORTGAGE KNOWLEDGE CENTER

PenFed Mortgage with Confidence

Home Buying Steps

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

Mortgage Topics

  • VA Loans
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CONVENTIONAL 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 an ARM Mortgage ¬– Especially With a Credit Union

Purchase, Homebuying 101, First Time Homebuyer, Finding a Home

Benefits of an ARM Mortgage - Especially With a Credit Union

What You'll Learn: The Basics of ARM Mortgages and Their Advantages

EXPECTED READ TIME: 7 MINUTES

March 25, 2022

If you're considering getting an adjustable-rate mortgage (ARM), the first place to look is your trusted credit union. Credit unions often have several different home loans and their other financial services like checking and savings accounts, auto loans, and credit cards.

Let's take a look at some of the advantages of ARM home loans combined with why consumers choose credit unions over other options.

Credit Union Convenience

Whether you're getting an adjustable-rate mortgage or fixed, credit unions offer benefits that mortgage brokers and mortgage bankers don't. And that's the convenience of other services. Having a financial institution with multiple products makes shopping and paying bills much more manageable.

For example, if you have your checking account with the credit union - all you have to do to pay your mortgage is transfer money internally. And it makes it easier to track because you see when it's due, getting ready to be paid, and paid.

Compare that to getting a home loan from a mortgage broker or mortgage banker – that's the only service they offer. So, you'd be going someplace else for your other financial needs. In today's busy world – convenience is one of the most significant advantages of using a credit union.

Groups in Common

When you shop for products and services at a credit union, in most cases, you'll have something in common with the organization. For example, some credit unions cater to:

  • Veterans
  • Teachers
  • City and county employees
  • Residents of a particular area
  • Often consumers like shopping locally or with a group with shared interests instead of a big bank or a mortgage lender.

    Charity Work

    Although many financial institutions support charities, it may be much easier to find a credit union that supports the causes that are most important to you. For example:

    • Local homeless shelters
    • Veteran outreach programs
    • Local economic development
    • Food banks and food delivery

    Credit Unions May Have Better Interest Rates

    Besides the lower initial interest rate of an adjustable-rate mortgage, credit unions may offer lower rates than banks or mortgage lenders. That's because they are non-profit. At the same time, banks and brokers are for profit. So when you're buying a home in a seller's market – getting the lowest rates so you can qualify for a higher loan amount becomes even more critical.

    That's why as a consumer, it's essential to compare offerings. An easy way to do that is to compare the APR, which reflects the total cost of borrowing the money.

    Check for Lender Incentives

    Many lenders, including credit unions, often offer incentives for home loans. It's wise to check your credit union first to see if any incentives could save you money. Incentives could include lower lender fees or credit towards some of the costs of getting a home loan.

    And if you don't see incentives on the lender's website – ask the loan officer you're working with to see if there are any upcoming specials.

    Borrowers with Credit Challenges

    When it comes to home loans, whether you're looking for government or conventional loans, many credit unions are less strict on credit guidelines than a bank. Each credit union has its requirements, but it's always a good idea to reach out to a credit union first if you have less than stellar credit.

    And you may be pleasantly surprised. Often consumers that think they'd never be able to buy a home discover that their credit isn't as bad as they thought. So, it's always a good idea to reach out to a lender to see where you stand.

    General Benefits of Variable Rate Loans

    • Not Your Forever Home

      Many first-time homebuyers purchase a home only to move within a few years. Often the first home is a starter and can be a bit too small for a growing family. Other reasons to move may involve having to do with work or being in the military and getting transferred to a different location.

      When you know you're going to move in 3 years, a 3/1 ARM is a good choice. The same is true for a 5/1 ARM, 7/1 ARM, or 10/1 ARM.

    • ARMS Have Lower Initial Rates

      Generally, an ARM interest rate has a lower initial rate than a fixed interest rate. That means a borrower may qualify for a higher loan amount which is especially helpful in a competitive real estate market when prices are rising, and there are bidding wars.

      In a seller's market, homes often have more than one offer. Having the leeway to put in a higher bid because you can qualify for more – may mean getting the home you want.

    Credit Unions Can't Be Beat

    From convenience to shared goals, beloved charities, and a variety of available financial products – always check your local credit union when you need a home loan, bank account, auto loan, or credit card. And when you're shopping for a home loan, take a look at the rates for ARMs. These mortgages may get you into a home that you wouldn't be able to afford or qualify for if you were getting a fixed-rate mortgage.

    For more information about PenFed Mortgages:
     

    PenFed Mortgage: 

    800-970-7766

    Get Started

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    image

    CONVENTIONAL 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, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; 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 October 2023 unless otherwise noted and are subject to change.

    APY = Annual Percentage Yield
    APR = Annual Percentage Rate


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    Routing #256078446

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    IMPORTANT NOTICE

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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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