Costco Mortgage Review: What Don’t They Do?

April 26, 2012 33 Comments »
Costco Mortgage Review: What Don’t They Do?

Costco, the well-known mega wholesaler that runs a chain of membership warehouses internationally, is rolling out it’s so-called “Mortgage Services” to all customers after a year of initial testing.

The company already offers all types of insurance, a co-branded credit card, RV and boat loans, beer, wine, electronics, not to mention gigantic tubs of mayonnaise.

So what’s the deal here? Why is Costco getting into mortgage? Could it really be that profitable?

Costco is Marketing Mortgages

Well, what Costco’s really doing is marketing a mortgage product on behalf of another company, namely, First Choice Bank.

They don’t get paid for the loans that close or receive any sort of loan origination fee.

Costco is simply partnering with First Choice Bank, who is leveraging the warehouse chain’s loyal and enormous customer base.

That means we should be more concerned about First Choice Bank, which is the company that’s really doing the lending, or at least funding/organizing it all.

First Choice Bank, out of Lawrenceville, New Jersey, is a baby in terms of years in the banking industry.

In fact, they just celebrated their five-year anniversary in March. And they only have five branches, all of which are in the Garden State.

But they do have a wholly owned subsidiary called, “First Choice Loan Services Inc.,” which is a direct lender with loan production offices in Arizona, Colorado, Florida, Maryland, New Jersey, Pennsylvania, and Texas.

And Costco apparently oversees the company, holding them to rigorous standards to ensure they protect their good name and their own customers.

Costco Doesn’t Do Jumbo Mortgages

Ironically, they only seem to offer conventional loans, FHA loans, and VA loans.

No mention of jumbo loans here folks, despite Costco specializing in all things jumbo.

So if you’ve got a big loan, it looks like you’ll be out of luck. But they do offer both purchase money mortgages and refinance loans.

And according to their most recent Costco Connection newsletter, they’re all about streamline refinances and the HARP 2.0 program for underwater borrowers.

Of course, the offerings of the program may be expanded as more approved lenders get on board.

First Choice Bank actually oversees a group of preferred lenders, including national depository banks and mortgage bankers, including CapWest Mortgage, which I’ve already reviewed.

Other participants in the Costco Mortgage program include:

- WestStar Mortgage Inc.
- Sterling Bank
- United Community Mortgage
- Bank of Internet USA
- Real Estate Mortgage Network
- New York Loan Exchange
- First Century Bank
- Wyndham Capital Mortgage
- Vanguard Mortgage

Costco Mortgage Works Like Zillow Mortgage Marketplace

In a way, the Costco Mortgage program works kind of like the Zillow Mortgage Marketplace.

Costco members enter in their personal details, including property and loan information, and are then presented with a number of mortgage rate quotes.

But borrower information will only be shared with participating lenders if you actually request a rate quote, which allows for some anonymity.

If you do happen to like one of the rate quotes, your lender fees will also be discounted because Costco caps them.

Costco Goldstar & Business members will pay less than $750 in lender fees, while Executive members will pay less than $600.

This compares to standard lender fees, which generally range from $1000-$2000.

So we know there are some savings there, but one thing stood out to me in the fine print that I didn’t love.

It notes 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 tells customers they should just accept the rate they’re given because it’s already rock bottom.

But I always recommend negotiating your mortgage rate, no matter how good or low it may be.

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 always good.

You should also shop around beyond Costco to make sure you exhaust all options. This includes checking out online lenders, visiting a local bank or two, 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 rate can mean thousands in savings or costs over the life of your loan.

Read more: What mortgage rate can I expect?

(photo: greenwenvy08)

33 Comments

  1. Jay May 4, 2012 at 1:34 pm -

    Hi Colin ~ Hope you’re having a great day. We do offer Jumbo Mortgages on costcofinance.com. Best, Jay

  2. Tom May 21, 2012 at 10:46 am -

    I am an executive member. Can this Costco sevice be used to see how much we can be pre qualified for?

  3. Colin Robertson May 21, 2012 at 1:13 pm -

    Unfortunately, their purchase mortgage form seems to want to know the purchase price of the home, along with your down payment. So you kind of have to know what you can afford before they spit out their lender info.

    That said, you may want to get pre-qualified with a bank or a broker first, then run your numbers through Costco when you comparison shop.

  4. Joe June 13, 2012 at 4:06 pm -

    It is an awesome serivce . I have been an RE broker for 14 Yrs. I would highly recommend it. I just closed a jumbo with them they were great. Rates were competitive, but the fee was awesome (only $500 origination ) you can,t beat it.

  5. Bill W. July 25, 2012 at 9:05 pm -

    I recently closed on a Jumbo loan with Bank of Internet. Their service was great and they are actually a Jumbo focused lender.

  6. Art Serros September 11, 2012 at 10:23 pm -

    I would like to know who doe’s harp loans?

  7. Betty October 8, 2012 at 6:37 pm -

    I just closed with Farmer’s Bank through Costco. That went great. They told me Fannie Mae would find a servicer…. there lies the problem. They moved me to Central Mortgage Company and they have awful reviews. I am especially concerned about the comments regarding forced insurance purchases when the customer’s insurance company sent a dec to the bank. I guess I’ll have to wait and see.

  8. chuckanw November 20, 2012 at 4:37 pm -

    My problem is that while they are held down on loan origination fees, they back load the loan with $1000 – $2500 with overpriced services and they claim they won’t know until closing. B.S. Now I am confused. Can someone help me with this conundrum?

  9. Dan December 12, 2012 at 12:12 pm -

    I’ve been trying to get a loan using RMC Vanguard thru the Costco deal and its been a nightmare. Still no closing after 3 1/2 months. It would have been worth the little extra money to have just gone thru my Bank and dealt with competent adults. I thought we cleared underwriting 6 weeks ago and then yesterday I was told to provide more documentation for underwriting to “review”. I never would have gone with RMC Vanguard if they hadn’t been one of the few recommended by Costco. They obviously don’t vet the companies very well.

  10. KH January 3, 2013 at 3:06 pm -

    Costco provided us with the worst mortgage experience EVER! Our Costco loan was through First Century Bank. There were delays (promised 30 day close – almost 60), lack of communication, high pressure to produce documents immediately – which we did and then had long periods of nothing.

    The loan documents arrived 30 minutes before the scheduled closing time – although the closing agent didn’t show until 4 hours later (after we made numerous calls).

    The loan agent used high-pressure tactics to get us to go through with the closing and let it fund – if we didn’t close that day our interest rate would go up, we had a contractual obligation. I was told any mistakes would be corrected such as escrow charges excessive (all of my taxes and insurance, plus monthly charges plus $4500) and incorrect (charging twice for 2012 taxes).

    The loan agent LIED and said I could have escrow removed once the loan closed, funded and went to the new servicing bank (my loan was actually sold immediately and new company won’t remove escrow).

    We weren’t supposed to have a December payment (loan closed Nov) my old mortgage company didn’t receive notification and pulled December payment – we hope to receive a refund in January.

    Then, our 1st new loan payment (Jan) was sent to First Century (per closing documents) and yesterday we received notice from new mortgage owner requesting the January payment. I called and they informed me that they need the first payment and it is my responsibility to get it from First Century. The hours for First Century and new mortgage company 9-5 M-F with no online account support.

    I wish we would have used my bank and paid the extra few bucks – the Costco savings was less than nothing considering the time, effort, aggravation and excessive escrow funds we had to put in and keep putting in.

  11. DM January 4, 2013 at 6:55 pm -

    I just completed a refinance through the Costco site and had NO problems. After the initial offers we chose First Choice Mortgage. I was a little concerned at first to work with a person located in California when I am in Virginia but it actually worked out good with the time difference I could call or send things later in the evening and they were still in. We worked with Walter Brimm and he was excellent. He answered all calls and emails promptly and was very patient with my questions.

    I also thought the fees looked higher when I initially saw the estimates, but when I asked if I was getting the correct discount for being a Costco member he went through the Good Faith estimate line by line with me and explained it all, including lender credits that made the closing costs come out to what I expected.

    Anyway, locked on November 19 and closed Dec. 21.
    Very pleased with the service.

  12. Ken January 7, 2013 at 11:16 am -

    Just received my closing docs from Wyndham, it seems as if they missed the $600 or less lender fee promised by Costco. In fact if the appraisal fee is included the overall fees after formation of the taxes, insurance and impounds included interest (always paid in arrears) in loan docs is paid in advance. Can you help with a review?

  13. Jeff March 15, 2013 at 10:52 pm -

    I just refinanced my home and two rentals with Costco and picked Wyndham Capital out of North Carolina. I am in California, and was very happy with the service I received. I had a banker named Brian Taylor. He explained all the things a borrower needs and wants to know to understand every fee and credit, etc. It took me about 3 weeks to get to singing! I love how they answered any question within minutes. Even call backs on weekends! They would not do jumbos though, so I still have a second mortgage to deal with, but if your loan is under $417,000 go for Costco! Disclosure… I have no connection to Costco or Wyndham. I am just a really happy person who just had a great refinance experience, which is rare! My last previous was with US Bank, and it was an absolute nightmare. Terrible experience with US Bank. 3 month process almost! Good Luck, Jeff

  14. uncle ricky April 19, 2013 at 7:33 pm -

    IM having a Terrible experience with costco program vendor is bank of internet the lender ..bait and switch tactics ..they ..said it would close in 30 days…they took a appraisal deposit up front which im disputing ..its been 2 months 15 different representives .underwriting wants over 1000 document they wont lock in rates ..poor service ..misrepresenting at start .asking for ridiculous documents.no personal communication with me …as bad as Chase bank or worse ..still havnt got loan..good luck to anybody with many corporations ,cash in bank ,excellent credit and a house worth much more than loan amount requested ..it should be a simple refinance….under $195,000…watch out for this program and Bank of Internet lender…Im NOT a Happie Camper…Uncle rickie ..

  15. Vic May 1, 2013 at 7:03 am -

    Costco refi took 6 weeks. Currently doing a refi with WF and its been 6 months.

  16. Roland July 2, 2013 at 8:43 am -

    I tried Costco, but none of their lenders could beat the rates at my local credit union, even with the reduced fees for members.

  17. Missy August 7, 2013 at 3:42 pm -

    We went with WestStar Mortgage, one of Costco’s lenders, and they were GREAT! Moved quickly, bent over backwards to get info we needed, and was truly concerned about helping us get the best deal out there. When we sent them a comparison GFE, from another bank, they matched or beat the numbers and helped walk us through everything. Would use them again, hands down. Excellent service and rates.

  18. Colin Robertson August 7, 2013 at 7:11 pm -

    Glad to hear your experience went well. I suppose one of the issues with Costco’s mortgage program is that they have more than one partner, so experiences will vary depending on which lender a borrower chooses.

  19. Loraine Rejman August 13, 2013 at 10:11 am -

    Per Costco’s website we went with First Century Bank, what a HUGE mistake. We started the end of May, it is now the middle of August and they are STILL requesting information. The third month bank receipts, pay-stubs, 1099′s for the last 2 years( faxed 3 times already—it’s not like they change) and more information about my pension company.. I really feel like we have been dragged over the coals… I NOW HAVE HUGE DOUBTS IF FIRST CENTURY CAN HANDLE MORTGAGE PAYMENTS…then what do we do?

  20. Colin Robertson August 13, 2013 at 11:19 am -

    This highlights the problem with Costco vouching for multiple mortgage lenders. If one in the bunch is bad, it sours their reputation. It’s hard enough to partner with one good company…if they can’t get it done, it might be time to look elsewhere.

  21. Rakesh Agrawal August 31, 2013 at 1:13 pm -

    I had worst experience of my life with COSTCO partner RMC Vanguard. Agent I was working with was super nice. I had excellent credit score.I was pre-qualified and provided all the documents they asked for and more. Still they kept asking for more. They promised the loan closing any day but no approval past 30 days. Finally after 5 weeks two days before the closing day when I still did not get approval of the loan, I had to make quick sale of my investments taking loss and finally ended up closing as cash transaction. I will never deal, work or recommend RMC Vanguard to any one.

  22. Mary Murillo November 1, 2013 at 10:27 am -

    I had an absolute SUPERB experience with Sterling Bank, one of the Costco mortgage options. I re-financed both my mortgages and decided to go with Sterling as opposed to a broker. They promise exceptional customer service & they deliver! I worked with one loan officer from start to finish and each re-fi closed in under 3 weeks. The service was the by far the best I’ve ever had and the cost-savings was a bonus. Highly recommend Jeff White at Sterling Bank!

  23. Emily November 8, 2013 at 10:28 am -

    I went to the Costco financial service site and entered my information. I kid you not that as soon as I hit enter my phone started ringing off the hook. Four days later I am still getting about four calls a day. The first ten minutes I answered the phone and mortgage brokers were calling on my call waiting. It has been awful. I have no idea how to make it stop. I would never ever use this service based on this experience. The rates were no better than I found online. Luckily I gave my home number instead of my cell. Never again.

  24. Colin Robertson November 8, 2013 at 11:15 am -

    Ouch…this is exactly why a lot of mortgage lead companies, such as Zillow and LendingTree, are going the anonymous route nowadays. You can shop freely without getting bombarded because lenders can’t see your personal information until you decide to make contact.

  25. Patricia Thompson December 9, 2013 at 5:45 pm -

    We just closed on our mortgage with Bank of Internet, in La Jolla, Ca. Our home is located in Ft. Pierce, Fl. It has taken 36 days and we were pre-approved. Now, 2 days later they stated the mortgage wasn’t funded. Why not? Many excuses and demanding of documents. It is a very bad company. Don’t do anything with them. We are thinking about ending our Costco membership because of this mess. I’d think twice before you go to Costco for a mortgage.

  26. Malacca February 4, 2014 at 9:30 pm -

    Bank of Internet – AVOID!

    Costco’s promise of $550 origination fee – Bull Shit. I LOVE Costco but they need to vet these banks before making promises.

    BATE AND SWITCH.

    I entered my info on Costco’s mortgage website and got a few calls from various banks – all had the same rate.

    I chose Bank of Internet (BOFI) as their fees were the lowest (they gave the highest lender credit). They said I would get certain amount of lender credit – received a clear prelim GFE clearly stating their fees and an estimate of title and prepaids. The salesperson was great.- responsive and knew how to communicate.

    I was pre-approved based on the initial information I sent them – W2′s, bank statements, etc. My income is high, cost of house low, and my credit very good.

    Then it went to a loan processor. And it went to hell.

    She is completely disorganized and can’t understand basic financial documents. As typical, I had to resend documents several times. It dragged on and on.

    They would send a list of needed documents. I send them. Then another “new” list a week or two later. Luckily the seller is patient.

    Never received a correct GFE. Each time it had a mistake. Then a week or two later another incorrect GFE.

    The day before the supposed 45 day deadline I receive a new request for completely new documents – a mile long. No way to complete it in time. Some documents have to come from my employer – takes time. Turns out these are basic documents needed for a mortgage – but they waited to the last minute to ask for them.

    Finally after a few months I am supposedly provisionally approved (but another long list of documents needed).

    FInally I get a GFE. Amazingly their bank fees are 4X higher than promised. Forget Costco’s promise.

    As you can see in other reviews, they like to drag the process out and then stick it to you with exorbitant fees. Of course you have to agree to it – or you will lose your dream house.

    So I will go through the process again – with another bank. Should be quick as I have all of the needed paperwork ready.

  27. sotia Teing April 16, 2014 at 11:24 am -

    I had bad experience with Sterling bank last year. The loan officer in Oregon screw up my rate. He didn’t lock my rate when he pre approve my loan. I hope Costco remove Sterling bank from the list.

  28. Jason Esposito June 5, 2014 at 3:41 pm -

    FYI…Weststar Mortgage, Inc. won Costco’s 2013 award for Operational Excellence. I am a loan officer with them, and have over 19 years of experience. If you would like to receive excellent customer service, and get the Costco discounted rates and fees please give me a call at 561-245-2229.

  29. Rich June 19, 2014 at 11:10 am -

    We went through Costco for our last mortgage and had major problems. From what I can determine, Costco’s portal goes through Affinity Partnerships, then to First Choice Loans and then to the mortgage brokers.
    I’m attempting to determine if Costco gets compensated for their mortgage advertising and their portal. Reading their financial statements, I can find nothing showing income or losses of Costco Financial Services, yet their involved in mortgages, auto sales, and insurance.
    Please let me know what you find out.

  30. Colin Robertson June 19, 2014 at 11:12 am -

    Interesting observation Rich. They aren’t working for free, that’s for sure. It’s got to be in the financials somewhere…

  31. Danette Jolly July 3, 2014 at 7:14 am -

    Using Weststar Mortgage Inc thru Costco. The fees are low but they appear to have a very carefully planned BAIT AND SWITCH in place. Things ran behind at the last minute (short week due to 4th of July holiday, back log with underwriters, etc) and so the loan isn’t to close on Monday as expected. That’s where they comeback with a huge fee to extend the rate lock. BUYER BEWARE! I would never use again nor recommend them. I have used Fremont Bank in the past and will use them from here on. Never had such an issue before.

  32. Peter Jolly July 10, 2014 at 8:35 am -

    I have been working with WestStar to try to resolve the issue listed above and produced a string of emails with Amy confirming actions needed, etc. They are suppose to be driving this bus and they obviously were looking the other way!! $750 is an outrageous fee to change to extend a rate lock that they missed. There is a lot of mortgage competition out there and I would definitely use someone else. I will be bending Costco’s ear also as they are a source that people trust but not this time.

  33. Peter Jolly July 10, 2014 at 8:49 am -

    Update, they agreed to split the fee with me and I appreciate that.

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