USDA One-Time-Close/OTC Construction Loans. 0% Down, 6% Seller Closing Credit Allowed

Build your dream home in a designated USDA eligible area with no money down

With Millennial Home Loans quick online loan application, determining if you qualify for an USDA One-Time-Close/OTC Construction Loan and for how much, has never been easier.

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USDA Construction Loan 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 2 Manufactured Home (Max 150 Days 3) Modular Home (Max 180 Days 3) Site-Built Home (Max 270 Days 3)
    No Draw Option No Interim Construction Draws $2,500 $4,300 $5,100
    Draw Options Up 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
  • USDA requires the Lender to pull a commercial credit report on the business, a personal credit report and criminal background check on the owners

Loan Amount

  • No maximum loan amounts. Loan amount dictated by USDA Guaranteed Underwriting System approval

Commitment Fee/Monthly Annual Fee

  • USDA charges a 1% Commitment Fee
  • Commitment Fee can be financed into the loan
  • Example:
    • Purchase price - $100,000
    • Base Loan amount - $100,000
    • Commitment Fee - $1,010 ($100,000 [purchase price] /.99 - 100,000)
    • Maximum financed loan amount = $101,010
    • USDA requires a monthly Annual Fee (i.e. mortgage insurance premium) with an annual factorial of .35%


  • 33.99/45.99% (DTI) with GUS Accept/Eligible underwriting findings

Property Type

  • House must be built in an eligible USDA Rural Development Location
  • 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
  • All borrowers on the loan must have ownership in and occupy the property
  • No co-signers permitted


  • All loans must be fully documented per Agency Guidelines
  • For Self Employed borrowers, in addition to Agency Guidelines, two years of the tax returns (personal and business) along with a year-to-date profit and loss (unaudited)
  • Most recent two-year tax returns will be obtained directly from the IRS, even if employed as a W-2 employee

Down Payment/Closing Costs

  • 0% down payment required
  • Builder/Retailer contribution toward buyers closing costs and escrows up to 6% of the construction costs
  • The Seller of the land contribution toward buyers closing costs and escrows up to 6% of the cost of the land


  • Amortization period: 30-year fixed rate
  • Borrowers are qualified on a 29 year amortization period for a 30 year mortgage