Tuesday, February 9, 2010

Loan in Process Account LIP

 What is a Loan in Process Account LIP?

The Loan in Process Account LIP acts as a deposit account for construction funds. The buyer's down payment is deposited into this account and is used for the initial construction costs that will be incurred while completing a project.

Disbursements of the actual loan funds will begin once the buyer's money is completely depleted. Furthermore, interest on the borrowed funds will be billed monthly on the amount withdrawn. Upon completion of the construction project,  the buyer will be asked to furnish a homeowner's insurance policy and monies for completing the escrow account.

Once final disbursements to the construction builder are made, monthly payments begin based on amortization of the balance at that time and the Loan in Process Accounting (LIP) is no longer essential.


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