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Building a home in Texas used to mean navigating two separate loans — a short-term construction loan from a conventional lender, then a refinance into your permanent mortgage after the certificate of occupancy was issued. That meant two closings, two sets of fees, two rounds of underwriting, and a rate that could change significantly between the time you broke ground and the day you moved in.
The One-Time Close Construction Loan changes that for every buyer type. Whether you qualify for a VA loan, an FHA loan, a USDA loan, or a conventional mortgage, there is a one-time close product designed for your situation. One application, one closing, one rate locked from day one.
This page covers all four one-time close programs available to Texas borrowers, how they compare side by side, and which one fits your situation. If you are an eligible veteran or active duty service member, the VA One-Time Close Construction Loan is almost always the strongest option
What Is a One-Time Close Construction Loan?
One closing covers everything. Land, construction draws, and permanent mortgage — locked together from day one so your rate never moves during the build.
Building a home in Texas used to mean navigating two separate loans. A short-term construction loan from a conventional lender, then a refinance into your permanent mortgage after the certificate of occupancy. Two closings, two sets of fees, two rounds of underwriting, and a rate that could change significantly between groundbreaking and move-in day.
The One-Time Close Construction Loan changes that for every buyer type. Whether you qualify for a VA loan, an FHA loan, a USDA loan, or a conventional mortgage, there is a one-time close product for your situation.
When your builder receives the certificate of occupancy, the loan converts automatically to your permanent mortgage at the rate locked at your original closing. No second application. No second appraisal. No second set of closing costs. And no exposure to rate movement during the 10 to 14 months your home is being built.
Why Rate Lock Matters in Texas
Construction timelines in Texas typically run 10 to 14 months. A rate that moves 0.5% during that period changes your monthly payment by $150 to $300 on a $400,000 loan. The OTC locks that rate before the first shovel goes in the ground.
🌏 Land Purchase or Equity
Buy land as part of the closing or apply existing land equity. Rolls into one loan — no separate land financing required.
🔨 Construction Draws
Funds paid to your builder in stages as work is completed and inspected. You pay interest-only on the drawn balance.
🏠 Permanent Mortgage
Certificate of occupancy issued. Loan converts automatically at the rate locked at closing. No second application.
📌 All Four Programs
VA, FHA, USDA, and Conventional OTC are all available in Texas. The right one depends on your eligibility and situation.
How the One-Time Close Process Works
The process is the same across all four programs. The specific documentation, qualification standards, and fees differ — the sequence does not.
Pre-Approval
Day 1Your lender verifies income, credit, and program eligibility, then issues a pre-approval letter. Builder qualification also begins at this stage — having your contractor's license and insurance documents ready here prevents delays later.
Builder Contract
Days 1–10You and your builder execute a fixed-price construction contract with a draw schedule and completion timeline. Cost-plus contracts are not eligible for any OTC program. See VA-approved builders in Texas if you need help finding a qualified contractor.
Appraisal
Days 5–15A program-approved appraiser evaluates your construction plans and establishes the expected completed value — called an as-built or subject-to appraisal. Your loan is based on the lower of the total project cost or the appraised value.
Underwriting
Days 10–40Full underwriting reviews income, credit, appraisal, eligibility, and builder documentation. Average timeline: 45 to 60 days from application to closing. Having complete documentation at submission is the biggest factor in hitting the shorter end of that window.
Single Closing
Day 45–60Land and construction financing close in one transaction. Your rate is locked for the life of the loan. If you are buying land as part of the deal, it transfers at this closing. Your builder can begin drawing funds immediately.
Construction Phase
10–14 MonthsYour builder requests draws as each phase completes. Each draw is inspected before funds are released. You pay interest-only on the drawn balance throughout construction — your payment grows as more funds are drawn but stays interest-only the entire build period.
Conversion to Permanent Mortgage
Move-In ReadyCertificate of occupancy issued. The loan converts automatically to your permanent mortgage at the rate locked at closing. Principal and interest payments begin. No second application, no second underwrite, no second closing.
Total timeline: Plan for approximately 12 to 16 months from pre-approval call to move-in day. Veterans who already own land and have a signed builder contract move through the process fastest.
What You Need to Qualify for an
OTC Construction Loan
Requirements vary by program. Compare all four before you apply.
- ✓Valid VA entitlement via COE
- ✓Veteran, active duty, Guard, Reserve or qualifying surviving spouse
- ✓Funding fee 2.3% first use — waived with service-connected disability
- ✓BAH grossed up 25% for qualification
- ✓No loan limit with full entitlement
- ✓No VA Builder ID required (rescinded Mar 2025)
- ✓Primary residence — all Texas areas
Best for: Veterans and active duty — strongest terms of all four programs.
Full VA OTC details →- ✓Open to all buyers — no military service required
- ✓580+ credit for 3.5% down; 500–579 requires 10% down
- ✓1.75% upfront MIP rolled into loan
- ✓0.55–1.05% annual MIP added monthly
- ✓Builder must be HUD-registered
- ✓2025 limit: $524,225 most TX counties
- ✓Primary residence — statewide Texas
Best for: Non-veteran buyers with limited cash wanting statewide coverage.
- ✓Open to all buyers in USDA-eligible areas
- ✓Household income within USDA county limits
- ✓$0 down — best non-VA zero-down option
- ✓1% upfront + 0.35% annual fee (lower than FHA)
- ✓Rural or suburban Texas areas only
- ✓Most TX land outside major urban cores qualifies
- ✓Primary residence only
Best for: Non-veteran buyers building in rural or suburban Texas with $0 down.
- ✓Open to all buyers — no restrictions
- ✓680+ credit — 720+ for best pricing
- ✓PMI required under 20% down — removable at 20% equity
- ✓No upfront mortgage insurance fee
- ✓All Texas areas — no geographic limits
- ✓Conforming or jumbo amounts available
- ✓Primary residence, 2nd home, or investment
Best for: Buyers with 680+ credit and a significant down payment above FHA limits.
Four Programs, Four Different Situations
Same single-closing structure. Different eligibility, cost, and fit depending on who you are and where you are building.
VA One-Time Close
Exclusively for veterans, active duty, National Guard, Reserves, and qualifying surviving spouses. $0 down, no mortgage insurance, and BAH grossed up 25% for qualification — an income advantage no other program offers.
The VA funding fee (2.3% first use, 3.6% subsequent) is waived entirely for veterans with a service-connected disability rating. Veterans at Fort Cavazos, JBSA, Fort Bliss, or any other Texas installation should model this program first.
Full VA OTC details →FHA One-Time Close
The most widely available OTC option for buyers without VA entitlement. Requires 3.5% down with a 580+ credit score. FHA carries mandatory mortgage insurance — 1.75% upfront rolled into the loan plus 0.55% to 1.05% annual MIP added to the monthly payment.
Available statewide with no geographic restrictions. Best for non-veteran buyers who want single-closing certainty but do not meet conventional credit or down payment requirements.
USDA One-Time Close
Zero down payment, available in eligible rural and suburban Texas. Most Texas land outside major urban cores qualifies. The USDA charges a 1% upfront guarantee fee and a 0.35% annual fee — significantly lower than FHA MIP. Household income must fall within USDA limits for your county.
The best zero-down option for non-veteran buyers building in rural or suburban Texas. Veterans in rural areas should still compare VA vs. USDA — the VA BAH gross-up frequently makes VA superior even when both offer $0 down.
Conventional One-Time Close
Requires 5% to 20% down and generally demands a 680+ credit score. No geographic restriction and no income limit. PMI is required above 80% LTV but can be removed once equity reaches 20% — unlike FHA MIP which stays for the life of the loan in most cases.
Best for buyers with strong credit, a meaningful down payment, and loan amounts above FHA limits who do not have VA or USDA eligibility.
Compare All Four OTC Programs
All four follow the single-closing structure. The differences are eligibility, down payment, and cost.
| Feature | VA OTC ★ | FHA OTC | USDA OTC | Conventional |
|---|---|---|---|---|
| Down Payment | $0 | 3.5% | $0 | 5% to 20% |
| PMI / MIP | None ever | MIP required | Guarantee fee | PMI if <20% down |
| Credit Score Min. | 620+ | 580+ | 640+ | 680+ |
| Income Limit | None | None | County limit | None |
| Geographic Limit | None | None | Rural / suburban only | None |
| Eligibility | VA entitlement | All buyers | Rural area buyers | All buyers |
| Upfront Fee | VA funding fee | 1.75% UFMIP | 1% upfront | None |
| Disability Exemption | Fee waived at 10%+ | None | None | None |
| 2025 Loan Limit | $806,500+ (no limit w/ full entitlement) | $524,225 most TX counties | County specific | Varies |
| BAH Gross-Up | +25% for qualification | Not available | Not available | Not available |
| Rate Lock | At closing | At closing | At closing | At closing |
| Best For | Veterans & active duty | Non-VA, lower credit | Rural TX buyers | High credit, large down |
Which Program Is Right for You?
Match your situation to the right program before you apply.
Building in Texas — What You Need to Know
Builder requirements, regional construction costs, and how land ownership affects every OTC program in Texas.
🔨 Builder Requirements
Effective March 31, 2025 under VA Circular 26-25-01, the VA no longer requires a VA Builder ID for standard construction loans. FHA, USDA, and Conventional OTC programs have their own builder approval processes handled directly by the lender.
In all cases, your builder must be licensed in Texas, carry general liability and workers compensation insurance, and submit a fixed-price proposal. Cost-plus contracts are not eligible under any program.
The lender acceptance process typically completes in 2 to 5 business days once your contractor's documentation is submitted. Having this ready before you apply keeps the timeline moving.
Find VA-Approved Builders in Texas →🌏 Land in Texas
Rural, acreage, and rural-residential lots are eligible across all four OTC programs. USDA has the strictest geographic requirements — the property must be in a USDA-eligible rural or suburban area. VA has no geographic restrictions whatsoever.
If you already own land, equity in that lot can reduce or eliminate your down payment requirement across all programs. Veterans with land equity and full VA entitlement almost always qualify for $0 out of pocket at closing.
| Texas Region | Est. Cost per Sqft |
|---|---|
| Houston Area | $155 – $170 |
| Dallas-Fort Worth | $170 – $185 |
| Austin / Central Texas | $185 – $210 |
| San Antonio / South Texas | $150 – $165 |
| West Texas / Panhandle | $135 – $150 |
| East Texas | $145 – $160 |
| Rio Grande Valley | $140 – $155 |
Frequently Asked Questions
Everything Texas borrowers ask about one-time close construction loans across all four programs.
Talk to Jason Noble —
One-Time Close Specialist
VA, FHA, USDA, or Conventional — your first call takes 10 minutes. We will confirm which program fits your situation and give you a real estimate before you spend a dollar on plans or land.