Costco is known for selling huge amounts of food and toiletries, roast chickens and pizza, and furniture and major appliances in its warehouse-style stores across the country. The members-only wholesale chain also offers something even bigger online: Costco mortgages.
The Costco Membership Mortgage Program could help you buy or refinance a home through a multi-lender platform operated by CrossCountry Mortgage. Here is an overview of how the program works and its compatibility with other similar programs.
What is the Costco Mortgage Program?
Once you join Costco, you can access the Costco Member Mortgage Program to get a new mortgage or refinance an existing mortgage.
There shouldn’t be any surprises with the mortgage program lenders’ fees, which are low. Lender origination fees are capped at $250 for executive members and $550 for other members. Borrowers are still responsible for paying third party fees such as title costs and appraisal fees.
The program was designed to add value to Costco membership, says Guy Cecala, executive chairman of Inside Mortgage Finance Publications.
“So you not only get discounts when you buy a variety of products at Costco stores, (but) you also get access to lower-cost financial products,” he says.
Costco is not a lender and has no direct role in the mortgage process, says John Alexander, CEO and president of Affinity Partnerships, which operates the program under CrossCountry Mortgage.
The Costco Mortgage Program offers a wide variety of loans — including conventional, jumbo, Federal Housing Administration, and Department of Veterans Affairs — and refinances. Since 2011, the program has funded more than 250,000 loans worth more than $90 billion, Alexander says.
How does the Costco mortgage program work?
Once you have indicated on the Costco website want to start, you will be redirected to another website operated by CrossCountry and Affinity. You will be asked to enter basic information such as your name, address, estimated mortgage amount, estimated credit score, and membership number.
With this information, the website then offers you many interest rate and term options. For example, a recent search for a $350,000 mortgage refinance yielded eight options for 30-year fixed-rate loans and eight for 15-year fixed-rate loans.
Your offers may be from CrossCountry, Box Home Loans, Mutual of Omaha Mortgage, NBKC Bank, Strong Home Mortgage, NASB Home Loans, Real Genius, or Lending.com.
The number of lenders in the program fluctuates. There could be as many as nine or as few as seven, says Alexander.
You can choose up to four lenders to receive your personal information. Once you confirm that they can contact you, representatives will call you to answer your questions and you can continue with the application process.
The program aims to ensure that members get mortgages that meet their needs, says Alexander. Each month, Affinity uses surveys, member feedback and operational information to measure how well lenders are meeting service expectations, he says.
Cecala adds that the program is somewhat comparable to LendingTree. “For LendingTree, you provide your information, and they basically buy it from a hundred lenders who want to bid on your loan on their platform,” he says.
However, the Costco Mortgage Program is different from LendingTree in that there is a select group of lenders chosen to participate, which members can choose from once they have shared their information.
What are the potential benefits of the Costco Mortgage Program?
One of the most obvious advantages is the cap on lender fees associated with the loan transaction. Without the program cap, borrowers could pay at least $1,500 in origination fees on a $300,000 loan. Non-members can also use the Costco Mortgage Program, but they won’t benefit from the lender’s fee cap.
Usually, consumers focus more on interest rates than fees, says Cecala. Costco’s mortgage rates aren’t necessarily as competitive as the fee discount it offers. “I don’t think (the program) will be able to offer much lower interest rates, and that’s mostly what people are looking for in a loan,” he says.
Cecala adds, “With interest rates rising, borrowers are even more focused on getting the best rate possible. Fees are also important, but in the context of a comprehensive mortgage program, people are looking at the rate plus fees. It’s usually the monthly payments that sell a borrower on a lender or mortgage product.”
With so many ways to get a mortgage and so many different loan types, shopping around is more important than ever. Be sure to check out the consumer ratings for each of the lenders listed in the Costco program.
“If you’re a Costco customer, you have to decide whether this program is better than just calling Quicken or going to a Wells Fargo or Bank of America office,” says Cecala.