Construction and land financing are two distinct elements. Land financing is used to purchase the land on which the property will be built. Construction loans are used to fund the building of the structure.
Land Financing
Land financing is used to purchase the land on which the property will be built. This type of financing can come in the form of a traditional mortgage or a land contract. Land contracts are often used when the buyer does not have the full purchase price of the land and needs to make payments overtime. A borrower who already owns the land doesn’t require land financing, just a construction loan.
Construction Financing
Construction loans are typically short-term loans that are used to cover the costs of building a new property. These loans are usually provided by banks or other financial institutions and are typically secured by the property being built. Construction loans can be used to cover the costs of materials, labor, and other expenses associated with building a new property.
