I can't speak with certainty on the topic, but my guess would be that you're starting -- assuming you're an individual buying this lot to build a house to live

I can't speak with certainty on the topic, but my guess would be that you're starting -- assuming you're an individual buying this lot to build a house to live in -- with a building loan which will turn into a mortgage when the house is finished. A building loan is how the bank limits its liability on a property that cannot yet act as collateral to a mortgage -- you go to the bank with a plan for how you're going to build a house, and they only give you the funds to complete it as different milestones are met. You get so much money for the foundation, so much for the framing, etc etc etc. If you successfully build a house in the time period given, the loan converts to a mortgage, secured by the new house, if you don't ... I'm not sure actually. Probably they start expecting payments on the loan at the much less favorable unsecured loan rate, then take over the property when you fail to make payments, to auction off and minimize their losses.