Costco, the well-known mega wholesaler that runs a chain of membership warehouses internationally, rolled out it’s so-called “Mortgage Services” back in 2011.
Now known as “The Mortgage Program,” their lending partners have funded nearly 200,000 mortgages worth more than $51 billion.
Costco already offers all types of insurance, a co-branded credit card, RV and boat loans, food and drink, jewelry, electronics, not to mention gigantic tubs of mayonnaise.
So what’s the deal here? Why did Costco get into mortgages? Could it really be that profitable?
Costco Is Marketing Mortgages, Not Actually Making Them
- Just to be clear here, there is no Costco Mortgage
- Nor is Costco actually originating mortgages on their own (they are NOT a lender)
- They are simply marketing home loans via their lending partners
- Because they have a massive stable of customers who are or want to become homeowners
Let me start by saying there is no “Costco Mortgage.” It does not exist.
What Costco’s really doing is marketing a mortgage product on behalf of another company, formerly First Choice Loan Services Inc., and now CrossCountry Mortgage.
CrossCountry actually oversees a group of preferred lenders, including national depository banks and mortgage bankers, such as NASB Home Loans and Consumer Direct Mortgage.
Apparently, Costco doesn’t get paid for the loans that close or receive any sort of loan origination fee, but there’s obviously some financial agreement in place for the partnership.
Costco initially partnered with First Choice Loan Services Inc., a Berkshire Bank subsidiary, but have since switched to CrossCountry Mortgage.
The lender is essentially leveraging the warehouse chain’s loyal and enormous customer base.
That means we should be more concerned about who CrossCountry Mortgage is, which is the company that’s really doing the mortgage lending here, including taking the loan application and underwriting, processing, and funding it.
CrossCountry Mortgage is based out of Brecksville, Ohio, and has been around since 2003. They have 200 branches nationwide and are licensed in all 50 states.
Despite only being around since 2003, they’ve grown exponentially and now have a team of 3000+ employees that produce $14+ billion annually. Thanks Costco!
They are a direct lender that offers all types of home loans, including conventional stuff backed by Fannie Mae and Freddie Mac, along with government loans like FHA and VA loans.
Costco apparently oversees the company (and the other lenders in The Mortgage Program), holding them to rigorous standards to ensure they protect their good name and their own customers, though they don’t endorse them or hold themselves responsible.
Costco Lender Partners Now Offer Jumbo Mortgages
- Early on Costco didn’t offer jumbo loans
- Which is ironic given the company’s typically economy-sized offerings
- But you can now get anything from a conforming loan to a jumbo loan
- Or an FHA loan, USDA loan, VA loan, and even a renovation loan
Ironically, when the Costco Mortgage program first started they only seemed to offer conventional loans, FHA loans, and VA loans.
There was no mention of jumbo loans, despite Costco specializing in all things jumbo, like massive tubs of mayonnaise.
So if you needed a big home loan, you’d be out of luck. But times have changed and CrossCountry now advertises jumbo loans up to $5 million dollar loan amounts.
Anyway, aside from purchase money mortgages and refinance loans, they also offer renovation loans, including the popular FHA 203k loan and the Fannie Mae HomeStyle Renovation Mortgage.
And they’re all about streamline refinances, such as the FHA streamline refinance and the VA IRRRL refinance.
Older Costco members (62+ years of age) might be interested in their reverse mortgage program as well.
Current Participants in The Mortgage Program from Costco
- CrossCountry Mortgage
- Lending.com (formerly eRates Mortgage)
- NASB Home Loans
- Strong Home Mortgage
- Consumer Direct Mortgage (a division of FirstBank)
- NBKC Bank
- Mutual of Omaha Mortgage
Former Participants in the Costco Mortgage Program
– Bank of Internet USA
– Berkshire Bank
– CapWest Home Loans
– J.G. Wentworth Home Lending, LLC
– PennyMac Loan Services, LLC
Costco Mortgage Works More Like a Mortgage Lead Service
- It’s more of a lead acquisition program than it is a unique home loan lending program
- Costco is just playing matchmaker by connecting their customers with a mortgage lender
- Similar to what they do with most of the products they sell on behalf of manufacturers
- But they do offer some special benefits for Costco members
In a way, the Costco Mortgage program works kind of like a mortgage lead service.
Costco members enter in their personal details, including property and loan information, and are then presented with a number of mortgage rate quotes from CrossCountry Mortgage and other affiliates.
If you happen to like their rates, your lender fees will also be discounted because Costco caps them.
In terms of financing options, Costco has nothing to do with what is and isn’t offered. They don’t set the minimum down payment or get involved with any other underwriting guidelines.
The same goes for mortgage rates – Costco doesn’t set them or have anything to do with them, but they say they’re “competitive.”
As noted, they simply let CrossCountry Mortgage and other lenders advertise their loan products to their client base.
Costco Mortgage Lender Fees Are Capped
- Costco provides reduced lender fees for its members
- Which includes things like application, underwriting, and processing
- But not third-party costs like appraisal and title/escrow fees
- Executive members only pay lender fees of $350 or less
- Gold star members pay lender fees of $650 or less
One plus to the program is that lender fees are capped for Costco members, with Executive Members paying $350 or less and Gold Star Members paying $650 or less.
Be sure to compare this to standard lender fees, which can range from zero to a very high number depending on the circumstances.
Also look beyond lender fees and consider the mortgage interest rate along with any closing costs charged.
While we know there are some potential savings here, it really depends what the interest rate is that goes along with those fees. Closing costs can’t be viewed in a vacuum, we need context.
Costco Mortgage Rates
Remember, Costco Mortgage doesn’t exist, so that means there aren’t “Costco Mortgage Rates.”
Instead, there are mortgage rates offered by lenders participating in The Mortgage Program for Costco.
As such, their rates will likely vary from lender to lender, and by unique loan scenario.
The good news is you should be able to get quotes from multiple lenders in one go, which is sort of like using a mortgage broker.
Then you can compare these rates and determine who to use, knowing they all cap lender fees since they’re part of the Costco program.
Just remember to consider lenders outside the Costco program as well to really see where they stand.
Costco Mortgage Reviews
On Trustpilot, The Mortgage Program for Costco Members currently has a 4.8-star rating out of 5 based on nearly 4,000 customer reviews.
That is an excellent rating, and a generally good sign that customers are happy with the lenders Costco has partnered with.
As noted, they work with a handful of lenders, so you may want to check out their reviews separately as well.
For example, CrossCountry Mortgage has a very solid rating of 4.97 out of 5 stars on Zillow based on nearly 10,000 reviews.
And NBKC Bank has a 4.93-star rating out of 5 on Zillow based on 9,600+ reviews.
Similarly, NASB Home Loans has a 4.95-star rating out of 5 on Zillow based on more than 1,000 reviews.
Be sure to check out the reviews of the lender partner you eventually consider to see where they stand.
Should You Use Costco to Get a Mortgage?
- Costco is yet another option to consider when searching for a mortgage
- But I wouldn’t rely on Costco alone to find the perfect home loan
- If you don’t shop around elsewhere you won’t know if it’s a good deal or a bad one
- Always take the time to obtain multiple quotes to ensure you properly comparison shop
Back in the day, there was one thing that stood out to me in the fine print that I didn’t love.
This is actually no longer on their website, but at one point they noted that lenders are “held to very strict pricing and fee standards which limit their ability to negotiate a lower fee or rate.”
To me, that told customers to just accept the rate they were given because it was already rock bottom.
While it’s not there anymore, and hopefully that’s no longer their position, I always recommend negotiating your mortgage rate, no matter how good or low it might be. There’s always room to go lower or to go elsewhere.
All in all, it appears as if Costco is just another avenue to go down while shopping for a mortgage, which isn’t necessarily a bad thing.
More options are generally a good thing.
I certainly wouldn’t blindly rely on Costco to find you the best mortgage out there. If you’re a Costco member, sure, give them a chance to beat other lenders.
But don’t just contact Costco and call it a day. You should also shop around beyond Costco to make sure you exhaust all lender options.
This includes checking out other online lenders, visiting a local bank or two, a credit union, and speaking with a mortgage broker or three. Don’t cut corners!
Getting a mortgage is a big deal, and even a slight change in interest rate can mean thousands in savings or costs over the life of your loan.
Pros and Cons of Costco Mortgage
- Home loans are originated by CrossCountry Mortgage, or a similarly high-rated mortgage lender
- Can apply online or at a brick-and-mortar branch
- They offer a digital mortgage application powered by Blend
- Lots of loan types to choose from including jumbos
- Lender fees are capped at $350 for Executive Members and $650 for Gold Star Members
- Licensed in all 50 states and the District of Columbia
- More than 92% of Costco members rated The Mortgage Program as excellent, very good, or good
The Maybe Not Great
- The mortgage doesn’t actually come from Costco (just their lender partner CrossCountry Mortgage or another affiliate)
Read more: What mortgage rate can I expect?