Costco offers a big-box approach to loans
Costco (NASDAQ: COST), the megagiant big-box retailer, isn't limiting its savings and services to retail goods anymore. Costco customers can now save big by applying for a home loan or refinancing an existing mortgage through the chain's newly established mortgage service.
Costco isn't underwriting or holding the loans, though. It has established a mortgage marketplace where third-party lenders compete for your business. Those lenders ultimately underwrite and hold the mortgages, and since many lenders participate, you can find a variety of loan programs (like FHA or VA) and competitive rates.
Like Costco's bulk-savings model, the program transfers savings to customers by avoiding unnecessary fees that can often be found with traditional mortgage lenders. Costco members pay the lowest fees, but nonmembers can use the service as well. With this program, you could very well end up with a big-name mortgage company. But by using Costco's mortgage service, you may be able to bypass some of the fees you'd otherwise pay.
Mortgage fintech creating new options
Real estate fintech (finance technology) is making major waves in the traditional mortgage market. Everything about what it does screams unconventional.
Companies like Reali offer homeowners a trade-in program for their houses, providing alternative financing and simplifying the process for those trying to buy one home and sell another simultaneously. Flyhomes and Homeward have cash-offer programs, giving homebuyers a competitive advantage in challenging markets by leasing or offering short-term financing to buyers until long-term financing can be secured through one of its lender partners. Divvy has a unique rent-to-own model, allowing homebuyers to secure a lease option on a home for up to three years -- with the option to purchase at any time within the lease period.
Sellers finance loans, too
If you don't qualify for a traditional loan, even through some of the unconventional methods listed above, you can always try to find a property offering owner financing. In this scenario, an owner (or seller) provides financing for a property -- no need to involve a bank.
Interest rates and terms will vary depending on the seller, and many times this unconventional mortgage route can be costly. But it's definitely an avenue worth exploring if alternatives don't fit your needs.
The Millionacres bottom line
Getting unconventional when it comes to getting a mortgage is slowly becoming the norm. This industry has remained relatively unchanged for over 100 years, but with advances in technology and changing consumer needs, it's no surprise these programs are appealing to prospective borrowers. Always read the fine print of any program and make sure you're comfortable with the terms and fees.