Melt butter in a saucepan over medium-high heat. Whisk in cornstarch until paste forms, 30 seconds to 1 minute. Whisk in milk gradually until smooth, 1 to 2 minutes. Simmer until thickened to sauce consistency, about 2 minutes.
Whisk Cheddar cheese, cream cheese, taco seasoning, and hot sauce into milk mixture until smooth, 1 to 2 minutes more. Add more milk as needed for desired consistency. Keep warm until ready to use.
