Costco Mortgage Program Review | NextAdvisor with TIME

Full Costco Mortgage Program Review

Costco is a warehouse-style store that sells everything from patio furniture to bulk groceries and large houseware packages. Now, you can also search for a home loan through the company’s mortgage program, which is available to members and non-members nationwide.

The retail giant isn’t actually behind the mortgages; instead, it connects you to a loan marketplace where you can compare mortgage rate quotes and apply to buy or refinance a home with participating mortgage companies. Lender fees are capped for Costco members, which can help you potentially save thousands of dollars. Here’s what you need to know about Costco’s mortgage program.

Costco Mortgage Program: Loan Types and Products

To apply for a mortgage, you will need to go to Costco Finance Lending Platform, enter your membership information and home purchase details, and request a quote. The platform uses the information to provide you with several offers from participating lenders. You can compare up to four lenders and, with your permission, company representatives will contact you. From there, you can compare loan details, select a lender, and apply for a home loan.

Here are the participating Costco lenders in June 2021:

• Home loans box
• ConsumerDirect Mortgage
• International mortgage
• Intercontinental Capital Group
• ready.com
• Omaha Mortgage Mutual
• NASB Home Loans
• NBKC Bank
• Solid mortgage loan

Lending options depend on the lender, but most offer conventional mortgages, Federal Housing Administration mortgages (FHA Loans), Department of Veterans Affairs mortgages (AV loans), jumbo loans, refinanceand a choice between fixed rate loans and adjustable rate mortgages (Arms). Participating lenders may also offer other options.

A borrower’s minimum credit score, down payment, and debt-to-equity requirements also vary from lender to lender, but it helps to know the general underwriting guidelines in advance. Borrowers looking for a conventional loan generally need a credit score of at least 620, a down payment of 3%, and a debt-to-equity ratio of 43% or less. For FHA loans, the credit score requirement drops to 500 or 580, depending on how much you can deposit.

Costco Mortgage Program Transparency

A company called Affinity Partnerships designed and operates Costco’s lending platform under the oversight of CrossCountry Mortgage. The platform is easy to navigate, breaks down important information into understandable terms, and helps you compare multiple loan offers. You’ll receive a quote within seconds, but you won’t hear from the lender unless you specifically give permission to be contacted. Once you’ve applied for pre-approval or a mortgage, the lender will provide you with a more specific APR and a list of fees you might pay.

Costco Mortgage Program: Rates and Fees

The Costco Mortgage Program advertises daily refinance and purchase rates for 15-year loans and 30-year loans once you provide a few details about what you are looking for. These rates can change daily and only the most qualified borrowers will benefit from the best conditions.

Costco is also advertising reduced fees for lenders, which can help members save thousands of dollars upfront. Lender origination fees — such as application fees, underwriting fees, and processing fees — are capped at $250 for executive members and $550 for other members. The company believes that lower fees and access to competitive interest rates can register members an average of $9,745 over the typical life of the loan.

All borrowers must still pay third-party fees, such as title insurance, appraisal fees, tax service fees and escrow fees, which are detailed in the Loan estimate.

If you decide to shop for a mortgage through Costco’s program, be sure to ask each lender questions before applying for the home loan. For example:

• Do you charge prepayment penalties?
• Does my quote include discount points?
• is there minimum credit score requirement?
• Are there other mortgage charges I should know?
• Can I block my rate for free?
• How long does it take to close a home loan?

Refinance with the Costco Mortgage Program

Refinancing allows you to replace your current mortgage with a new loan, usually with terms that are better suited to your budget. Depending on the lender you choose under the Costco Mortgage Program, you may have these options:

• Rate and term refinancing, which offers you a new home loan with a new interest rate, a different loan term, or both.
• Refinancing by collection, when you take out a mortgage for more than you currently owe and use the extra money for any kind of expenses.
• FHA streamline refinancing, which is available to homeowners with an existing FHA mortgage. Borrowers may be able to skip the home appraisal and credit check process.
• Refinance loan with PV interest rate reduction (IRRRL)is designed for VA loan borrowers looking to reduce their interest rate or change from an adjustable rate to a fixed rate.

When you speak with a lender, ask these questions to understand your loan options:

• What types of refinance do you offer?
• How long does it take to complete a refinance loan?
• Does the interest rate include discount points?
• Do you offer special discounts or offers for regular customers?
• Are there any fees associated specifically with refinancing?

Costco’s Mortgage Program Compared to Other Mortgage Lenders

How to Shop for the Best Mortgage Rate

If you’re looking to save some money, the best thing to do is shop around. This is one of the main advantages of the Costco mortgage program: after providing your information, you will instantly receive offers of several lenders. After seeing what’s out there, you can choose the best offer or use the offers to negotiate with other lenders. This can generate substantial savings.

Let’s take an example: let’s say you want to buy a house worth $250,000 with a 5% down payment and a 15-year mortgage. You receive quotes from two different lenders; both charge the same closing costs, but one offers a lower interest rate:

• With an interest rate of 3.5%your monthly principal and interest payment is $1,697.
• A rate of 3.25% earns a monthly principal and interest payment of $1,640.

The lowest rate saves you $57 per month – and while that may not seem like much, that’s a savings of $20,520 over 15 years.