Costco is known for selling massive amounts of groceries and toiletries, fried chicken and pizza, and furniture and major appliances from its warehouse-like stores across the country. The members-only wholesale chain also offers something even bigger online: Costco mortgages.
The Costco Member Mortgage Program could help you buy or refinance a home through a multi-lender platform powered by CrossCountry Mortgage. Here you can see how the program works and how it compares to 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.
With the mortgage program’s lender fees being low, there shouldn’t be any surprises. Lender 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-related costs and appraisal fees.
The program was designed to increase the value of Costco membership, says Guy Cecala, CEO of Inside Mortgage Finance Publications.
“So not only do you get discounts when you buy a variety of products at Costco stores, (but) you also have access to cheaper financial products,” he says.
Costco isn’t a lender and doesn’t play a direct role in the mortgage process, says John Alexander, CEO and president of Affinity Partnerships, which operates the program under CrossCountry Mortgage’s leadership.
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 indicate on the Costco website you 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 loan amount, estimated credit score and membership number.
With this information, the website will then offer you many interest rate and term options. For example, a recent search for a $350,000 mortgage refinance returned eight options for 30-year fixed-rate loans and eight more for 15-year fixed-rate loans.
Your offers could come 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 varies. It could be as many as nine or just seven, Alexander says.
You can select up to four lenders to receive your personal information. Once you have confirmed that they can contact you, representatives will call to answer your questions and you can proceed with the application process.
The program is designed to ensure members get mortgages that meet their needs, Alexander says. 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 similar to LendingTree. “For LendingTree, you provide your information, and they basically buy it from about 100 lenders who want to bid on your loan on their platform,” he says.
However, the Costco mortgage program differs from LendingTree in that there is a select group of lenders who are chosen to participate, which members can choose from once they have shared their information.
What Are Potential Benefits of the Costco Mortgage Program?
One of the most obvious benefits is the cap on lender fees associated with the loan transaction. Without the program cap, borrowers could pay at least $1,500 in loan origination fees for a $300,000 loan. Non-members can also use the Costco mortgage program but do not benefit from the lender’s fee cap.
Typically, consumers are more focused on interest rates than fees, Cecala says. Costco’s mortgage rates aren’t necessarily as competitive as the fee discount they offer. “I don’t think (the program) can offer significantly lower interest rates, and that’s primarily what people look for in a loan,” he says.
Cecala adds: “As interest rates rise, borrowers focus even more on getting the best possible interest rate. Fees are also important, but in the context of the full mortgage package, people look at interest plus fees. Generally, it’s the monthly payments selling a loan or mortgage product to a borrower.”
With so many ways to get a mortgage and so many different types of loans, it’s more important than ever to shop around. Be sure to look at the consumer ratings for each of the lenders featured in the Costco program.
“As a Costco customer, you have to decide if this program is better than just calling Quicken or going to a Wells Fargo or Bank of America office,” says Cecala.