Your builder is not just a contractor — they are a co-borrower in the eyes of your lender. The lender is funding draws to your builder throughout a 6–12 month project, and if the builder fails financially, the project stops. Builder approval is how lenders protect themselves, and you, from that risk. Here is exactly what the process requires in Arizona.
What Lenders Require for Builder Approval
Arizona ROC License
RequiredThe builder must hold an active license from the Arizona Registrar of Contractors. For custom home builds, this is typically a B-1 General Residential Contractor license. Verify at roc.az.gov before selecting a builder.
General Liability Insurance
RequiredMinimum $1M per occurrence / $2M aggregate. The lender or title company is listed as an additional insured. The certificate must be current at closing and may need renewal during the build.
Workers' Compensation Insurance
RequiredRequired for any builder with employees. If the builder is a sole proprietor with no employees, a waiver may be acceptable in some cases — but this must be documented.
Completed Builder Package
RequiredA lender-specific questionnaire covering the builder's experience, current projects, financial position, and references. Most lenders have a standard form; the process takes 1–2 weeks.
Financial Statements
RequiredLenders review the builder's financial stability to assess whether they can carry costs between draws. A builder who is financially overextended is a project risk regardless of their license status.
Signed Construction Contract
RequiredA fixed-price or cost-plus contract with a defined scope of work, schedule, and draw structure. The contract is reviewed by the lender before closing.
Description of Materials / Spec Sheet
RequiredA detailed list of finishes, fixtures, and materials that will be used in the build. This is used by the appraiser to produce the as-completed value estimate. Vague specs produce conservative appraisals.
Prior Construction Experience
ReviewedNot always a hard requirement, but lenders review the builder's track record. A builder with no completed projects in the target price range may face additional scrutiny.
The Arizona ROC License: What It Means and How to Verify It
The Arizona Registrar of Contractors (ROC) licenses contractors who meet experience, examination, and financial requirements. For a residential custom home build, the relevant license class is typically B-1 General Residential Contractor.
You can verify any contractor's license status, license class, insurance status, and complaint history at roc.az.gov. This is a free public database. Before signing a contract with any builder, verify:
License is active (not expired, suspended, or revoked)
License classification matches the type of work being performed
No open or unresolved complaints
Bond is current
State licensing requirements vary
Arizona requires a GC license for residential construction. Other states have different rules — for example, Texas does not require a GC license at the state level, though licensed subcontractors are still required for licensed trades (electrical, plumbing, HVAC). We lend in most states and apply the licensing standard for each state, with no overlays beyond what state law requires.
How Long Does Builder Approval Take?
Builder approval typically takes 1–2 weeks once the builder submits a complete package. The most common cause of delay is an incomplete submission — missing insurance certificates, outdated financial statements, or a builder who is slow to respond to the lender's requests.
The builder approval process runs in parallel with the borrower's qualification review and the as-completed appraisal. Starting it early — even before you have a signed contract — can prevent it from becoming the bottleneck that delays your closing.
Builder Red Flags to Watch For
The builder approval process protects you as much as it protects the lender. These are warning signs that a builder may not be the right fit for a construction loan project:
No active ROC license or license in a different classification than the project requires
Insurance certificates that are expired or do not list the lender as additional insured
Unable to provide financial statements or references from prior projects
Requesting unusually large upfront payments before work begins
No fixed-price contract — only a verbal agreement or a cost-plus with no cap
Active complaints or disciplinary actions on the ROC license (check roc.az.gov)
Unwilling to submit to the lender's builder approval process
Owner-Builder Approval: How It Works Differently
If you are acting as your own general contractor, the approval process is different. In Arizona, owner-builders must hold an ROC GC license to legally act as their own GC. The lender reviews your experience, the project scope, and your plan for managing licensed subcontractors.
Our owner-builder construction loan program offers the same terms as a standard construction loan — 5% down, 95% LTV, single-close, up to $3M — without the 20–50% down payment requirements that most lenders impose on owner-builders. Primary and secondary residences only; no spec financing.
Frequently Asked Questions
Does my builder need to be pre-approved by the lender before I can close?
Yes. The lender must approve your builder before the construction loan can close. Builder approval requires an Arizona ROC license, general liability and workers' compensation insurance, and a completed builder package. This process typically takes 1–2 weeks.
What is an Arizona ROC license and does my builder need one?
The Arizona Registrar of Contractors (ROC) issues licenses to contractors who meet experience, testing, and financial requirements. For custom home builds, the builder typically needs a B-1 General Residential Contractor license. Verify at roc.az.gov.
What insurance does my builder need for a construction loan?
Lenders require general liability insurance (typically $1M per occurrence / $2M aggregate) and workers' compensation insurance. The lender is listed as an additional insured on the GL policy.
Can I use a builder who has not worked with my lender before?
Yes. Most lenders will approve a new builder who meets the documentation requirements. Starting the builder approval process early prevents it from delaying your closing.
What happens if my builder cannot get approved?
You can work with the builder to resolve the deficiency (obtain the missing license or insurance), or select a different builder. Builder approval issues are one of the most common causes of construction loan delays.
Do owner-builders need to go through builder approval?
Owner-builders are reviewed differently. In Arizona, owner-builders must hold an ROC GC license. The lender reviews experience, project scope, and subcontractor plan. Our owner-builder program offers the same terms as a standard construction loan.
Ready to Start the Builder Approval Process?
We can start the builder approval process before you have a signed contract — so it runs in parallel with your qualification review and does not delay your closing.