Would You Go to Costco for a Mortgage?
Ah, the Costco shopping list. 4 foot tall bottle of vodka? Check. A 16-pack of muffins the size of a toddler’s head? Check. TVs, tires, mattresses? Check, check, check. But a home mortgage? As of April of this year, you can check that off the list too.
Costco has long ago successfully surpassed the grocery, garden, and home supply categories, so maybe I shouldn’t be surprised. The giant retailer already sells heath and auto insurance and stock brokerage services. And now, in partnership with small local banks and lenders (such as First Choice), Costco offers home mortgage loans.
The loan program is full service, at least according to Costco. You can opt for a home loan, to refinance, or apply for a veteran’s loan. All three categories are supported by Costco and offered—at differing costs—to members. Those differing costs depend on what level of membership you hold with Costco, whether Executive, Gold Star, or regular member.
Whatever your status, however, Costco estimates it can save you as much as $5000 over life of your loan. Executive members incur lender fees of $600 or less; Gold Star $750 or less. To this writer, who just spent close to $5000 in lender fees to close on her first home, those figures sound almost as good as…well, a four foot tall bottle of vodka.
To date, Costco has sold over 10,000 mortgages, and expects to sell more as publicity for the new service increases. Meanwhile, CNN Money reports that customers have already begun saving. One member, Ray Sheets, went into buy bottled water and came out with an application to refinance his home.
“Sheets went onto Costco's site, put in his information and quickly accessed offers from four lenders..…And the closing costs -- of about $2,500 -- were about a third of what he would have had to pay through other lenders, he said…..Sheets refinanced his $170,000, 15-year fixed mortgage carrying a 4.25% rate into a 30-year loan with a rate of 4%. The move lowered his monthly payment by nearly $500 to $811 a month.”
Lenders Compete (in a Different Way)
Costco’s site seems to be modeled after online services like LendingTree, whereby applicants can peruse offers from several potential lenders. However, in Costco’s case, the applicant’s identity doesn’t get sent to the lender until the applicant actually decides on that lender. In most cases, the name and contact info are fair game from the beginning of the process. Personally, I like the Costco route better, not needing any more spam than I already get.
Traditional Brokers Weigh In
Tammy Wittren, who manages a team for Northwest Mortgage Group in Portland, Oregon, is underwhelmed. She points out that “Costco isn’t a new player in the mortgage deal. They were in the business years ago, they got out, and are getting back in now. It will be like many internet lenders – an option for the client who wants to shop solely based on rates and fees but isn’t concerned about closing on time or customer service. They’ll be here today and gone tomorrow.” But is it actually cheaper to work through Costco? Tammy says no. “I find that when we compare quotes with internet lenders, they aren’t any cheaper than we are, a mortgage banker/broker. You just have to compare apples to apples: quotes for the same programs and terms, with the same down payments.”
Sounds like it’s up to us to find the best deal, which sadly includes doing a lot of homework about the kinds of loans available, how much we want to put down, plus the interest rates and closing costs associated with each program. Yes, it's a big job. Here’s some help to get you started.
- What’s the Point: An Overview of Mortgage Points
- Could a Credit Union Help You Buy a Home?
- First-time Buyer Chronicles: A Difficult Loan Process Can Make You Stronger, and Smarter
Photo via Wiki Commons/Broken Sphere
Anna Marie Erwert writes from both the renter and new buyer perspective, having (finally) achieved both statuses. She focuses on national real estate trends, specializing in theSan Francisco Bay AreaandPacific Northwest. Follow Anna on Twitter: @AnnaMarieErwert.