Freddie Mac’s Loan Prospector, often referred to as LP and now formally known as Loan Product Advisor℠, is a widely used automated underwriting system (AUS) that supports mortgage lenders in evaluating borrower creditworthiness and loan eligibility rapidly. It assesses a wide range of data, including credit history, income, assets, debts, and property value, against Freddie Mac’s specific loan guidelines.
When a borrower applies for a mortgage, the loan officer inputs their complete financial information into the system, which processes it instantly. LP then issues a risk classification that helps lenders decide whether to proceed with the loan, request additional documentation, or reject the application according to Freddie Mac’s eligibility standards.
How Loan Prospector Works
LP evaluates key metrics such as debt-to-income (DTI) ratios, loan-to-value (LTV) ratios, credit scores, and property types. It then provides one of several recommendations:
- Accept/Eligible: The loan meets Freddie Mac’s criteria and often requires less documentation, accelerating loan approval.
- Caution/Refer: The application needs further review by a human underwriter and may require additional paperwork.
- Ineligible: The loan fails to meet one or more fundamental Freddie Mac criteria, requiring alternative loan solutions.
Benefits for Borrowers and Lenders
LP streamlines the approval process, reducing the turnaround time for loan decisions and improving consistency across applications. Borrowers benefit from faster pre-approvals and clearer expectations about their loan status.
Loan Prospector vs. Desktop Underwriter
Freddie Mac’s LP competes with Fannie Mae’s Desktop Underwriter (DU), a similar automated underwriting system. Lenders often submit applications through both to identify the most favorable outcome.
Common Misconceptions
- LP does not make the final loan decision; that responsibility lies with a human underwriter.
- A “Caution” result does not mean denial but indicates additional review is needed.
- Rejection by LP doesn’t preclude other loan options, such as Fannie Mae loans, FHA, VA loans, or non-conforming loans.
For more details on related loan terms and mortgage processes, see our Government-Sponsored Enterprise (GSE) Loan and Secondary Mortgage Market articles.
For authoritative guidance, visit Freddie Mac’s official Loan Product Advisor page at FreddieMac.com.
Sources
- Freddie Mac: Loan Product Advisor
- NerdWallet: What Is an Automated Underwriting System (AUS)?
- Investopedia: Desktop Underwriter (DU)
