Just like “we’ll beat any deal!” in any other competitive sales endeavor, this is a game. Actually, it’s even more of a game for loans than it is anywhere else, used cars included. What they are hoping is that you’ll go there last, and tell them what the best thing you’ve been quoted, and then they can sell you on their loan and most people will go with them, because “we’re here, not there.”
The first issue is that anyone can give a low quote. It’s like the old joke, “Your lips are moving.” Unless they guarantee that quote, that’s all they’re doing: flapping their gums. All a quote is is an estimate, and I’ve more than adequately covered the games it is legal to play with a Good Faith Estimate (or MLDS in California). By itself, A low quote means nothing. Loan officers can, legally, quote you one loan and deliver a completely different loan at a completely different rate with a completely different (higher, or course) closing cost. Without some kind of Loan Quote Guarantee, a quote isn’t worth the paper a verbal contract is printed on.
The second issue is that even if they are quoting a loan they intend to deliver, unless they are quoting to the exact same standard, the quote game favors the lender who pretends third party costs don’t exist, who pretends that you’re not going to get zonked for the add-ons that you are going to get zonked for at the end of the process, the lender who quotes based upon a loan that you do not qualify for. Are you going to pay these costs? Absolutely. Would you rather know about them at the beginning, so you can make an informed choice, or get blindsided at closing (assuming you even notice)?
The third issue is that they are looking for safe harbor, and they’re hoping you give it to them. If someone brings them everyone else’s quotes, they know what everyone else has talked up, how big the lies are that the prospect has been told, and they just have to tell one that’s a little bit better. This is trivial when you’ve got all that information you’ve been freely given. This is called false competition. You’ve metaphorically given them a mark, and told them to “tell a more attractive story than this one.” Easy enough in a storytelling context – tell the same story with a little more sex – and even easier with loans.
A good loan officer has no need to know what quote you’ve been given to tell you what the best loan they can deliver is. Tell them to quote you the best loan they can without this information. Ask them if they’ll guarantee that quote, because a quote that isn’t guaranteed – as in they pay any difference, not you – is worthless. That’s how you can choose the best rate that can really be delivered, not by allowing someone the advantage of knowing how much they have to lie to get the business.
Caveat Emptor