A One-Time Close (OTC) construction loan finances land purchase, construction draws, and the permanent mortgage in a single loan with a single closing. The traditional alternative — separate construction loan, then refinance to permanent — means two closings, two sets of fees, and re-qualifying after construction when rates may have moved. OTC fixes the rate at the start. Three programs available: FHA OTC (3.5% down, 580+ FICO), VA OTC (zero down, no PMI, eligible veterans), and Conventional OTC (5–20% down, 700+ FICO, conforming or jumbo). Most banks won't touch construction lending. LHFS specializes in it.
Toggle FHA, VA, or Conventional to see how each handles the same construction project. Move the sliders for land cost, construction cost, and down payment. Land equity counts toward your down payment if you already own the lot.
Land cost$80,000
$0 (own lot)$400K
Construction cost$320,000
$100K$900K
Down payment3.5%
3.5% min25%
Credit score (FICO)680
580 min800+
Rate at this profile:7.125% (30-yr fixed, locked at construction start). Specific rate depends on credit, lender, and current market.
→ Your monthly cost
FHA OTC
Principal & Interest
$2,646
PMI / MIP
$180
Total loan
$392,755
Inc. UFMIP financed
Cash required
$14,000
3.5% of project
Total monthly
$2,826
P&I + MIP
FHA OTC at 3.5% down is the most accessible construction path for most buyers. Permanent MIP is the trade-off — you can refinance to conventional after construction completes and equity grows. Closes in 60–90 days; construction term typically 12 months.
Calculator uses representative 2026 rates by FICO band: VA 6.50–7.00%, FHA 6.875–7.625%, Conventional 6.75–7.50%. Loan limits: FHA county floor $541,287 / ceiling $1,249,125; conforming baseline $832,750; jumbo above. Your specific quote depends on credit, market, and lender pricing at lock.
Three OTC Programs · FHA / VA / Conventional
Three programs. One construction loan that fits.
Most lenders only offer one OTC variant — typically conventional with a high down payment. LHFS writes all three, so the program selection follows the borrower, not the lender's product gap.
Feature
FHA OTC
VA OTC
Conventional OTC
Min down
3.5% with 580+ FICO
$0 for eligible veterans
5–20% typical
Min FICO
580 (some lenders 600+)
620 typical (VA has no floor)
700+ typical
Loan limit
FHA county limits ($541K floor / $1.25M ceiling)
No statutory limit; lender max ~$1.5M
Conforming or jumbo (up to $4.5M)
Mortgage insurance
UFMIP 1.75% + permanent MIP 0.55%
None; funding fee 1.25–3.30%
PMI if <20% down; drops at 80% LTV
Funding fee
None
1.25–3.30%, financed; waived for disability-rated
None
Eligibility
Most homebuyers; primary only
Veterans, active duty, qualifying spouses
Strong credit, ample cash; second homes allowed
Construction term
12 months typical
12 months (rolls into 30-yr permanent)
12 months
Land
Equity counts toward down; lien rolled in
Equity counts; lien rolled in
Equity counts; lien rolled in
Property type
Single-family primary; modular OK
Single-family primary; modular OK; some manufactured
Single-family or 2nd home; broader specialty types
Best for
Most buyers, lower credit, smaller down
Eligible veterans — the best deal available
Higher loan amounts, second homes, specialty builds
OTC Eligibility · Across All Three Programs
Two qualification paths. Both must pass.
Borrower-side requirements vary by program (above table); property-side and builder-side requirements are largely consistent across all three OTC variants.
→ Property side
What qualifies
All three programs require an occupant primary residence. Investor builds, vacation homes for FHA/VA, and certain specialty types are excluded.
Property typeSingle-family detached primary residence; modular OK; some manufactured (program-specific).
Specialty buildsConventional supports the broadest set: ICF, SIP panel, log, timber frame, barndominium, even 3D-printed in some markets.
LandOwned or being purchased simultaneously. Land equity counts toward down payment; an existing lot lien is paid off and rolled into the new loan.
ZoningZoned for residential single-family use; the build must comply with local code; permits coordinated with the builder.
AppraisalSingle appraisal as if the home were already built, based on plans, specs, and comps. Loan-to-value is calculated from this.
Key principle: the appraiser values the home as if completed based on plans and specs. This is what allows OTC to lock permanent financing before construction starts — a major advantage when rates are volatile.
→ Builder side
Who can build
All three programs require licensed, insured, lender-approved builders. Owner-builder is generally not allowed unless you hold a general contractor license.
LicenseLicensed general contractor in the build state with active credentials.
InsuranceGeneral liability + workers' comp; LHFS verifies before approval.
Track recordTypically 2+ years experience with similar build types and 3+ comparable completed projects.
Bid & specsDetailed bid with line-item costs, plans, and specs; the lender reviews for accuracy and reasonableness.
Owner-builderGenerally not allowed unless you hold an active general contractor license.
Draw scheduleTypically 4–6 draws tied to milestones (foundation, framing, mechanicals, drywall, finishes, completion).
If your builder isn't on our approved list: we can review and add them within 1–2 weeks if they meet the standards. Don't pick a builder before this conversation — it saves rework if your preferred builder doesn't qualify. See contractor tips for what to look for.
Three Builder Scenarios · Different Programs, Different Right Answers
Three buyers. Three programs.
Same hypothetical project — $80K land, $320K build, $400K total. Three buyers with different profiles take three different OTC programs.
IScenario · N° 01FHA: best access
The Mendelsohn-Pajaris
Profile: First-time buyers, FICO 645/660, building a $400K home in TX. 3.5% down ($14K). Conventional excludes them on FICO.
The deal
Program
FHA OTC — the only path at this credit profile
Total loan
$386K + UFMIP ≈ $393K
Cash required
$14,000 down
Total monthly
P&I $2,627 + MIP $180 = $2,807/mo
Rate
7.0% locked at construction start
IIScenario · N° 02VA: best deal
SSgt Hesper Cordeiro-Vautrin
Profile: Army veteran, FICO 720, no disability rating. $0 down, building the same $400K home. First-time VA use.
The deal
Program
VA OTC — no down, no PMI
Total loan
$400K + 2.15% funding fee ($8,600) = $408,600
Cash required
$0 (besides closing costs)
Total monthly
P&I $2,615 + no PMI/MIP = $2,615/mo
Rate
6.625% locked at construction start
IIIScenario · N° 03Conventional: bigger build
Ophelia Strakosch-Renaldi
Profile: Tech executive, FICO 770, $200K cash available. Building a $650K custom home on a $150K lot in CA — exceeds the FHA limit. Not VA-eligible.
The deal
Program
Conventional OTC — the only program at this loan size
Total loan
$640K (20% down on $800K project)
Cash required
$160,000 (or $10K with $150K lot equity)
Total monthly
P&I $4,206 + no PMI (20% down) = $4,206/mo
Rate
6.875% locked at construction start
Related Resources · Renovation Section
Compare alternatives. Before you build.
Building from scratch isn't always the best fit. If an existing home with renovation potential gets you there faster, a 203(k), HomeStyle, or refi-and-renovate may be a better tool.
What buyers and builders ask most about OTC Construction. Real answers — none of the construction-loan industry runaround.
One closing for the entire process — land, construction, and permanent mortgage. Compare to a traditional construction loan, which closes twice: once on the construction loan, then again to refinance into a permanent mortgage at completion.
Two closings means two sets of fees, two underwriting cycles, two appraisals, and rate risk between them. OTC eliminates all of that: lock your rate at start of construction, fund draws as work progresses, mortgage converts automatically when the home is complete.
VA OTC: $0 down for eligible service members and veterans, no MIP/PMI. Best deal if you qualify.
Conventional OTC: 5–20% down depending on occupancy, FICO 700+. Best for stronger credit and properties exceeding FHA county limits.
The calculator above lets you toggle between programs to see how the math changes for your specific scenario.
No. OTC programs require a licensed, insured general contractor. Owner-builder construction is not permitted under FHA OTC, VA OTC, or Conventional OTC.
The builder must be approved by the lender — typically meaning state license, $1M+ general liability, workers' comp, and demonstrable construction history. If your top criterion is acting as your own GC, OTC isn't the right tool. Read our contractor tips before vetting builders.
Depends on the program. FHA OTC and VA OTC: mortgage payments don't start until the home is complete and the Certificate of Occupancy is issued. Conventional OTC: some lenders allow interest-only payments during construction; others defer until completion.
During the 6–12 month construction phase, the lender holds the unfunded loan balance in escrow and releases draws as the inspector approves milestones. Interest accrues on the funded portion only.
FHA OTC: 12 months (with a 6-month extension available). VA OTC and Conventional OTC: typically 12 months, with possible extensions for weather or material delays. Custom and luxury homes often need 12–18 months total.
Builders submit a construction schedule with the bid; significant deviations require lender approval. Build buffer time into the schedule — material lead times for windows, cabinets, and custom finishes regularly run 4–16 weeks. See the renovation timeline guide for realistic phasing.
Yes — OTC loans finance both land acquisition and construction. If you already own the land, the equity counts toward your down payment.
Realistic example: you own a $150K lot free and clear, building a $400K home. Total project = $550K. Your $150K lot equity covers your entire down payment for an FHA OTC at 3.5% (which would otherwise have been $19,250). Land equity is the quiet superpower of construction loans.
FHA OTC: yes, for HUD-approved manufactured homes meeting permanent foundation requirements. VA OTC: yes, similar requirements. Conventional OTC: more limited and lender-specific.
The home must be a primary residence, on an owned lot (not leased land), with permanent foundation per HUD or VA standards.
Two paths: (1) the contingency reserve built into the original loan (typically 10–20% of construction cost) absorbs change orders first; (2) the borrower brings cash to close the gap if contingency is exhausted.
Major scope changes mid-build require lender approval and may trigger re-appraisal. Lock scope at closing; treat any change order as a serious decision, not a casual upgrade.
Building New?
One closing. One rate lock. One monthly payment.
Sixty-second short app — no SSN, no hard credit pull. Tell us about the build (lot, plan, builder if you have one), your service profile if VA-eligible, and your credit. We'll quote FHA, VA, and Conventional OTC honestly based on what fits your situation. Most lenders won't write construction at all — we specialize in it.
NMLS #1796·Construction lending specialist since 1988·Equal Housing Lender
Disclosures. All numbers on this page are estimates based on representative scenarios. Actual rates, terms, qualification, and approval depend on lender review, credit history, debt-to-income, builder approval, plan and specification review, after-construction appraisal, land valuation, and lender overlays which may add stricter requirements than program baseline. One-Time Close (OTC) construction-to-permanent loans combine land acquisition (if applicable), construction draws, and permanent mortgage in a single closing. Construction term typically 12 months; the loan converts to permanent amortization upon completion and final inspection. 2026 FHA loan limits per HUD: $541,287 floor / $1,249,125 ceiling; 2026 conforming limits per FHFA: $832,750 baseline / $1,249,125 high-cost. VA loans have no statutory loan limit (lender-set max ~$1.5M typical). Owner-builder is generally not permitted across all three programs unless the borrower holds an active general contractor license. The property must be a primary residence (FHA OTC, VA OTC); conventional may allow second homes. Three-buyer scenarios are illustrative examples, not real client data. Construction loan rates may include a 0.25–0.50% premium over standard purchase; the rate is locked at construction start, fixed for the permanent term. Land Home Financial Services, Inc. NMLS #1796. Equal Housing Lender. Licensed in 50 states. This is not an offer to make a loan or a commitment to lend. Information current as of 2026.
