Earlier this year, warehouse club retailer Costco announced that it was moving a pilot program offering mortgages to members up to full-time status. The Costco mortgage program is still going strong and members have access to a fairly good mortgage lending program.
Costco mortgage aisle, next to the cereal
Some time ago, warehouse club chain Costco announced that it was launching a trial program of offering mortgages to member. The chain had struck up a deal with a number of mortgage loan lenders, who could offer bids for loans and the applicant, whose name wouldn’t be revealed to the lenders, could select the loan they liked best. The chain announced in April, according to a CNN article from that month, that the program had been a success.
Since then, according to Daily Finance, the Costco mortgage program has been implemented. Members can apply for a home loan at any Costco store. It isn’t the chain’s first foray into finance; loans for boats and recreational vehicles are also available to Costco members.
The process is still the same. According to the Chicago Tribune, the applicant enters their information into the Costco mortgage application form and lenders can make bids, as it were, for the applicants’ business. Their name isn’t revealed and they have to give approval for any sensitive information to be transmitted to a lender.
Non-members can apply, but Costco members get a benefit of discounted lender fees. One recipient of a home loan through Costco quoted by CNN reported lender fees of $2,500, which is steep but about one-third of what a person can normally expect.
There aren’t a huge number of lenders to choose from, though. When the program was tested in 2011, there were five mortgage lenders participating in the Costco mortgage program. There are now 11, according to Daily Finance, which isn’t a huge to pool to draw from but better than a jab in the eye with a sharp stick. None of the lenders in the Costco mortgages program is one of the major players, such as Wells Fargo, Bank of America or JPMorgan Chase.
The same underwriting processes apply and the offered rate is subject to change during the underwriting process.
Auto and student reportedly in the works
It isn’t the first foray of a major retailer into the mortgage business. Sears, according to Daily Finance, used to offer home loans through the Sears Mortgage Banking Corp, though the chain sold the subsidiary in 1993 to PNC Bank.
It isn’t entirely a profit grab either, since Costco doesn’t get a percentage for hooking a member up with Costco mortgage loans. The chain only gets fees for marketing the service. The chain has been said since earlier this year to be looking to expand into auto loans and student loans, but that has yet to materialize. Costco health insurance is also said to be on the horizon.