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With Millennial Home Loans quick online loan application, determining if you qualify for an FHA OTC Construction Loan and for how much, has never been easier.

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FHA One-Time-Close/OTC Construction Loans.

3.5% Down, 6% Seller Closing Credit Allowed

Yes you can build your own home with only 3.50% down!

FHA Construction Loans Program Guidelines

Loan Purpose

  • Finance Construction Costs
  • Purchase a lot
  • Land can be currently owned, including:
    • Recently purchased
    • Owned Free and Clear
    • With a current mortgage

Credit Profile

  • 620 minimum middle credit score for all borrowers on the loan
    • 620-659: A minimum of 2 qualifying credit scores are required
    • 660+: A minimum of 1 qualifying credit score
  • No foreclosure or short sale within three years of contract ratification date
  • No Chapter 7 bankruptcy discharge within two year of contract ratification date

Construction Timeframe

  • Construction timeframe is based on the construction type, with a maximum of:
    • 150 days for a manufactured home
    • 180 days for a modular home
    • 270 days for a stick-built home
  • Construction can start immediately after closing

Draw Option

  • This option requires a “Project Review” by the Underwriter/Lender
  • At closing the land seller or if financed, the land will be paid off/funded
  • The maximum number of draws are based on the house type, with:
    • Manufactured/Modular Home Retailers allowed up to three draws
    • Site-Built Home Builders allowed up to five draws
  • For Manufactured/Modular homes, provided the house has been built, the factor invoice is in place, acceptable property coverage is in place, the Retailer may request that the factory or floor-plan source can be paid the invoice cost of the home. This doesn’t count against the Retailers three draws
  • Draw amount will be based on inspections and percentage of completion
  • Maximum amount that can be paid out prior to the final draw being issued is 80% of the Builders/Retailer’s Contract Price
  • Final draw is paid after the Certificate of Completion or Occupancy is issued

No Draw Option

  • Streamlined process where the Builder/Retailer has agreed to no interim construction draws through out the process and will receive all funds at the time the home is completed
  • At closing the land seller or if financed, the land will be paid off/funded
  • Saves time since there are no 3rd parties involved in performing a Project Review
  • Builder/Retailer pays a lesser Administration Fee

OTC Administrative Fees and Construction Interest

  • The Administrative and Interest cost of a One-Time-Close loan is based on the type of the home, amount financed, and whether the Builder/Retailer request to be paid via a draw. See below chart for an estimated break-down of the One-Time Close Administration Fee:
Builder Financed Amount 1,2Manufactured Home (Max 150 Days 3)Modular Home (Max 180 Days 3)Site-Built Home (Max 270 Days 3)
No Draw OptionNo Interim Construction Draws$2,500$4,300$5,100
Draw OptionsUp to $100,000$6,700$6,800$8,000
Up to $125,000$7,800$8,100$9,400
Up to $150,000$9,000$9,300$10,800
Up to $175,000$10,200$10,500$12,300
Up to $200,000$11,400$11,700$13,700
Up to $225,000$12,600$13,000$15,100
Up to $250,000$13,800$14,200$16,600
Up to $275,000$15,000$15,400$18,000
Up to $300,000$16,100$16,600$19,400
Each Additional $25,000$1,200$1,200$1,400

1 Builder Financed Amount is the amount the Builder/Retailer borrowers from the lender during construction, including any contribution to land costs, closing costs, and prepaids. This amount can’t exceed the final contract price for the home and improvements.

2 Financed land cost more than 20% of the loan amount may require an additional fee. Please call for more information.

3 If construction if not completed by the agreed upon date, a fee equal to 10% of the One Time Close Administration Fee will be charged to extend the construction period for each 30-day period up to a maximum of one year.

  • The Administration Fee is inclusive of the following:
    • Construction Administration Fee
    • Construction Underwriting Fee
    • Construction Closing Coordination Fee
    • Interim Construction Interest
    • Inspection Fee
    • Draw Fee
    • Title Updates
    • Modification and Agreement and Recordation
      • Note: The Administration Fee is charged directly to the Builder/Retailer (not the borrower) and therefore will not appear on the Loan Estimate

Builder/Retailer Responsibility

  • The builder/Retailer must act as the only General Contractor (“GC”) on the project
  • GC can’t be related to the borrower(s) or an employee/employer of the borrower
  • GC must be insured, licensed, and bonded

Loan Amount

  • Maximum loan limit is established by The Department of Housing and Urban Development and is determined by the County where the property is located and by the household units. Click here for loan limits in your area
  • Base Loan amount is determined by the purchase price of the house, plus total renovation budget, less the down payment (minimum 3.50% down required). The Base Loan can’t exceed maximum HUD loan limits
  • Total Loan amount is the purchase price, less the down payment, plus the FHA 1.75% Upfront Mortgage Insurance Premium (UFMIP)
  • Maximum $750,000 regardless of the maximum FHA loan limits

Mortgage Insurance Premiums

  • Upfront Mortgage Insurance Premium (UFMIP) 1.75% of the Base Loan Amount
  • Annual Mortgage Insurance Premium (MIP) required
  • MIP Calculations are as follows:
Mortgage Term of More Than 15 Years
Base Loan AmountLTVMIP (bps)Duration
Less than or equal to $625,500≤ 90.00%8011 years
> 90.00% but ≤ 95.00%80Mortgage term
95.00% > 95.00%85Mortgage term
Greater than $625,500≤ 90.00%10011 years
> 90.00% but ≤ 95.00%100Mortgage term
> 95.00%105Mortgage term
Mortgage Term of Less Than or Equal to 15 Years
Less than or equal to $625,500≤ 90.00%4511 years
> 90.00%70Mortgage term
Greater than $625,500≤ 78.00%4511 years
> 78.00% but ≤ 90.00%7011 years
> 90.00%95Mortgage term


  • As determined by Automated Underwriting System or AUS with DTI ratios up to 56%. Requires a Desktop Underwriter “Approved/Eligible” or Loan Prospector “Accept/Accept” findings
  • Manual underwrite not accepted on the FHA OTC program

Property Type

  • One-unit properties only
  • Stick Built Housing
  • Modular Homes
  • Manufactured Housing – Multi-wide only (no single wide permitted)
  • Ineligible property types include: condominiums, multiple Homes on one lot, unique properties including log homes, tiny homes, etc.


  • Owner occupied only
  • Non-occupant co-signers permitted


  • All loans must be fully documented per Agency Guidelines
  • For Self Employed Veterans, in addition to Agency Guidelines, two years of the tax returns (personal and business) along with a year-to-date profit and loss (unaudited)

Down Payment/Closing Costs

  • 3.50% down payment required based on the combined purchase price of the land and construction costs
  • If already own land, the down payment can come from equity in the land
  • Seller and Builder contribution toward buyers closing costs and escrows up to 6%
  • Closing cost help can come from flexible sources including family member gifts and loans against a 401k retirement account


  • Amortization period: 15 and 30-year fixed rate
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