Construction Loan Builder Requirements in Oklahoma
A borrower may be financially qualified and the proposed home may appraise well, but a construction loan still depends on having an approved builder.
Builder approval helps confirm that the contractor has the experience, financial capacity, insurance, and professional history needed to complete the home according to the approved plans, construction budget, and schedule.
Spurr Mortgage recommends beginning the builder-approval process early—ideally before the construction contract is finalized. This gives the builder time to gather the necessary documents and allows potential issues to be addressed before they delay closing.
Three Parts of a Successful Construction Loan
A successful one-time-close construction loan generally requires approval of three separate components:
- The borrower
- The construction project
- The builder
Each component must satisfy the applicable loan requirements. Approval of the borrower, project, or builder does not guarantee approval of the other components or final loan approval.
Minimum Builder Qualifications
The following standards apply to the builder-approval process described by Spurr Mortgage. Additional documents or stricter requirements may apply depending on the investor, loan program, property, and construction project.
1. Construction Experience
The builder must generally have:
- At least three years of relevant construction experience
- Completed at least five homes from the ground up
The review focuses primarily on ground-up residential construction experience. Remodeling, repair, subcontracting, or trade work alone may not satisfy this requirement.
2. General Liability Insurance
The builder must provide evidence of general liability insurance with at least $1 million in coverage.
The insurance policy must be current and acceptable for the proposed construction project. The builder may need to maintain the required coverage throughout construction.
3. Workers’ Compensation Documentation
If the builder has employees, evidence of workers’ compensation insurance may be required.
If all labor is performed by independent contractors and the builder qualifies for an exemption, the appropriate workers’ compensation exemption documentation must be completed.
4. Identity Verification
The builder must provide a valid driver’s license or another acceptable form of identification requested during the approval process.
5. Business or Personal Credit Review
When available, the builder’s Dun & Bradstreet business credit profile must show a minimum PAYDEX score of 65.
If a Dun & Bradstreet report is unavailable, the builder’s personal credit history may be reviewed instead. The stated personal credit standards include:
- Minimum credit score of 620
- No 60-day late payments
- No 90-day late payments
- A 30-day late payment may be considered with an acceptable written explanation
Meeting the minimum score does not guarantee builder approval. The builder’s complete credit history, experience, financial condition, and the overall project risk will be considered.
6. Homeowner References
The builder must provide at least three homeowner references from customers who hired the contractor for new construction or renovation work completed more than six months ago.
References should be current and reachable. They should be able to discuss the builder’s:
- Workmanship
- Communication
- Budget management
- Organization
- Ability to complete the project on schedule
7. Subcontractor or Trade References
The builder must also provide at least three references from subcontractors, suppliers, or construction trades.
These references help document the builder’s payment history, organization, professional relationships, and ability to manage a construction project.
Builder-Approval Document Checklist
Builders should be prepared to submit the following:
- Completed builder application or questionnaire
- Company information and ownership details
- Construction résumé or project history
- Evidence of the required experience and completed homes
- General liability insurance certificate
- Workers’ compensation policy or exemption documentation
- Valid identification
- Authorization for the applicable business or personal credit review
- Three homeowner references
- Three subcontractor, supplier, or trade references
- Any additional licenses, registrations, or documents required in the project’s location
Submitting a complete builder package early can help prevent unnecessary processing and closing delays.
What Happens After the Builder Is Approved?
Builder approval is only one part of the construction-loan review. The following items must also be acceptable:
- Architectural plans
- Building specifications
- Construction contract
- Detailed budget
- Appraisal
- Required permits
- Construction schedule
- Draw schedule
During construction, loan funds are generally released in stages as the approved work is completed and verified. The builder must cooperate with draw requests, inspections, lien documentation, permit requirements, and change-order procedures.
How Builders Can Help Avoid Closing Delays
Builders can reduce the possibility of delays by following these steps:
- Submit a complete builder package as early as possible.
- Use the same legal business name on applications, contracts, insurance documents, and supporting records.
- Respond promptly to requests involving references, insurance, credit, or project documentation.
- Provide a detailed, fixed, and internally consistent construction budget.
- Do not begin construction or request deposits outside the approved process without receiving guidance.
- Report significant changes to the project’s scope, price, specifications, or schedule before proceeding.
- Make sure required insurance and business documents remain current throughout the process.
Frequently Asked Questions
Can the borrower act as the general contractor?
Owner-builder arrangements are not automatically eligible. The proposed builder structure must be reviewed under the applicable loan program before the project proceeds.
Borrowers should not assume they can act as their own general contractor without receiving prior approval.
Does the builder need three years of experience?
Under the builder standards described here, the builder must have at least three years of relevant construction experience and must have completed at least five homes from the ground up.
What insurance does a builder need?
The builder must provide general liability insurance with at least $1 million in coverage. Workers’ compensation insurance or acceptable exemption documentation may also be required.
What credit score does a builder need?
If the builder does not have an available Dun & Bradstreet report and personal credit is reviewed instead, the stated minimum credit score is 620.
The builder should have no 60-day or 90-day late payments. The complete credit profile and overall project risk remain subject to review.
Can a builder with a 30-day late payment be approved?
A 30-day late payment may be considered if the builder provides an acceptable written explanation. Approval depends on the builder’s complete credit history, project risk, and applicable investor requirements.
How long does builder approval take?
The timeline depends on how quickly a complete builder package, insurance documents, credit information, and references are received and verified.
Beginning the builder-approval process early is the best way to reduce possible delays.
Start Builder Approval Early
Planning an Oklahoma construction loan? Spurr Mortgage can explain the builder-approval package and help coordinate the borrower, builder, and project review.
Learn more about our Oklahoma construction-loan options or call 405-348-9919 before construction begins.
Important Information
Builder and loan requirements may vary by investor and loan program and are subject to change. Builder approval does not constitute borrower, project, or final loan approval. This page is provided for general informational purposes and is not a commitment to lend.
Spurr Mortgage | 405-348-9919 | Equal Housing Opportunity