I have nothing against Costco at all, and am actually very impressed with their business model.
I in fact shared this excellent “Business Breakdowns” podcast (about Costco) with several team members a few weeks ago because it is so interesting and inspiring (and I continue to highly recommend it).
But, Costco may not be the best place to obtain a mortgage – and here is my “horror story.”
Several years ago, we pre-approved a young couple for a purchase, working primarily with the wife.
The husband, who had minimal interaction with us, somehow became convinced that he could find a better deal elsewhere for reasons unbeknownst to us.
I know about all of this because the young couple was referred to us by a close friend of mine and he kept me apprised the entire time.
CHEEZ-ITS AND A MORTGAGE
In any case, when the couple was at Costco getting a 5 lb box of Cheez-Its, an 84 pack of Coors Light, and a big-screen TV, they decided to “grab a mortgage” too because… why not? 😊
This was in 2016 when the market was almost as competitive as it is now, with bidding wars for almost every entry-level property the young couple was interested in.
They were also bidding in markets with unique properties that often fostered both financing and appraisal issues.
Long story short: no listing agent would accept their offer with a Costco “pre-qual” letter.
Again – I have nothing against Costco, but they (or the mortgage bank they refer to) had no reputation in the purchase market and listing agents were unwilling to risk having to deal with financing issues in a hyper-competitive market.
So, it took the young couple almost a year before they finally got their offer accepted – even though they were making competitive offers.
If they had a “pre-approval letter” from any reputable lender (not just JVM), they likely would have had numerous offers accepted.
ENDED UP PAYING 8% MORE FOR HOME
Anyway – here is the “horror” part: homes appreciated about 8% in the submarket they were bidding in over the 12 months they were making offers.
So, their effort to save money on a mortgage not only delayed their homeowning dreams by a year, but it also cost them about $60,000 in terms of a higher home price.
Even scarier – the rate “Costco” ended up giving them was the same rate we would have given them.
I have seen similar stories play out time and again over the years, and I share this one as just another reminder for homebuyers chasing deals in the mortgage realm: buyer beware.😊
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167