Costco is known for selling jumbo packs of toilet paper, rotisserie chicken and even 7-pound tubs of Nutella from its warehouse-style stores across the nation. But you might not know that the members-only wholesale chain offers something even bigger online: Costco mortgages.
The Mortgage Program for Costco Members could help some members buy or refinance a home through a multilender platform operated by CrossCountry Mortgage. Here’s a look at how the program works and how it stacks up to other similar programs.
What Is the Costco Mortgage Program?
When you join Costco, you can access the Mortgage Program for Costco Members, which can be used for new mortgages or refinancing.
[Compare: Mortgage and Refinance Rates in Your Area.]There are no surprises with Mortgage Program lender fees, which are low. Lender origination fees are capped at $250 for Executive members and $550 for other members.
The program was designed to add value to the Costco membership, says Guy Cecala, CEO and publisher of Inside Mortgage Finance Publications.
“So you get not only discounts when you shop for a variety of products at Costco stores, (but) you also have access to lower-cost financial products,” he says.
But Costco is not a lender and does not have a direct role in the mortgage process, says John Alexander, CEO and president of Affinity Partnerships, which runs the program under the direction of CrossCountry Mortgage.
The Costco mortgage program offers a wide variety of loans including conventional, jumbo, Federal Housing Administration and Department of Veterans Affairs loans available to first-time buyers, buyers seeking second homes and investors. You can also get a Costco refinance. Since 2011, the program has funded more than 222,000 loans worth more than $69 billion, Alexander says.
How Does the Costco Mortgage Program Work?
Once you indicate on the Costco website that you want to start, you will be taken to another website run by CrossCountry and Affinity. You’ll be asked to enter basic information such as your name, address, estimated mortgage loan amount, estimated credit score and member number.
With that information, the website then provides you with many interest rate and term options. For example, a recent search for a $350,000 mortgage refinance loan produced seven options for 30-year fixed-rate loans and seven more for 15-year fixed-rate loans.
Your offers could come from CrossCountry, Consumer Direct Mortgage, Mutual of Omaha Mortgage, NBKC Bank, Strong Home Mortgage, NASB or Lending.com.
[Read: Best Mortgage Lenders.]The number of lenders in the program fluctuates. There could be as many as nine or as few as seven, Alexander says.
You can select up to four lenders to receive your personal information. Once you confirm that they can contact you, representatives will call to answer your questions.
The program is geared toward ensuring that members get mortgages that meet their needs, Alexander says. Every 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 shop it around to 100 or so lenders who want to bid for your loan on their platform,” he says.
However, the Costco mortgage program is different from LendingTree because there is a select group of lenders chosen to participate, which members can select from once they share their information.
What Are Potential Advantages of the Costco Mortgage Program?
One of the most obvious benefits is the cap on lender fees linked to the loan transaction. Without the program’s cap, borrowers could pay at least $1,500 in fees on a $300,000 loan. Nonmembers can use the Costco mortgage program as well, but they won’t benefit from the lender fee cap.
[Read: Best Mortgage Refinance Lenders.]Usually, consumers focus more on interest rates than fees, Cecala says. Costco mortgage rates aren’t necessarily as competitive as the fee discount it offers. “I don’t think (the program) is going to be able to offer significantly lower interest rates, and that’s primarily what people shop for in a loan,” he says.
“Most people, even if they know they can get better service at one lender or another, still pick a lender on perceived costs,” Cecala adds. “Everybody wants the best and lowest rate.”
With so many ways to get a mortgage and so many different types of loans, shopping around is more important than ever. Make sure to look at the consumer ratings for each of the lenders featured in the Costco program.
“If you’re a Costco customer, you have to decide if this program is better than just calling up Quicken or going to a Wells Fargo or Bank of America office,” Cecala says.
