Building a new home in Goshen and staring at a contract full of “allowances”? You are not alone. Allowances can help you move forward before every finish is picked, but they can also create surprise costs if you do not plan ahead. In this guide, you will learn what builder allowances are, how they affect your budget and loan, and the local steps to take in Goshen and Elkhart County to avoid costly surprises. Let’s dive in.
What a builder allowance is
A builder allowance is a dollar amount in your contract for buyer-selectable items that are not finalized yet. Common examples include cabinets, countertops, flooring, lighting, and appliances. When you make your selections, the actual cost is compared to the allowance. If your choice costs more, you pay the difference through a written change order. If it costs less, you may receive a credit, but that depends on the contract language.
Allowances let the build move forward while protecting the builder from underpricing unknown items. They also give you a baseline to plan upgrades without guessing. The key is clarity. You want itemized allowances that spell out what is included and how overages or credits are handled.
Common allowance categories
Kitchens and baths
These often include cabinets, countertops, sinks, faucets, hardware, and tile. Ask if installation, delivery, and taxes are included. Confirm lead times for cabinets and countertops early so your build stays on schedule.
Flooring and finishes
Expect allowances for carpet, hardwood, LVT, and tile. Some builders quote a per-square-foot allowance, which helps on variable sizes. Clarify whether removal, subfloor prep, and disposal are included.
Appliances and systems
Ranges, dishwashers, microwaves, and refrigerators may be included as an allowance. HVAC choices are sometimes specified rather than allowed, but upgrades can be priced as options. Get model-level details in writing.
Exterior and site work
Look for line items for landscaping, sod or seed, driveway, mailbox, and house numbers. Subdivision guidelines can drive final costs, so review them with your builder before you sign.
Contract terms to review
Itemized vs. lump-sum
An itemized allowance lists a dollar amount for each category, which is clearer for you and your lender. A lump-sum allowance covers multiple items with one number and is harder to track. For most buyers, itemized allowances are preferable.
Credits and change orders
Your contract should state exactly how unused allowance credits work and where the credit appears, such as on the settlement statement. Overages should be approved via a written, signed change order that shows the price impact and any schedule change. Keep every document.
Deadlines and lead times
Ask for a selection calendar so you know when cabinets, countertops, flooring, lighting, and paint must be chosen. Missed deadlines can cause delays or force last-minute, more expensive choices. Confirm who is responsible if a long-lead item pushes the timeline.
Fees, markups, warranties
Builders may charge administrative fees or apply markups on upgrades. The contract should disclose these. Also confirm that upgraded items are covered by the builder’s warranty and that manufacturer warranties are provided at closing.
Financing and appraisal basics
Lender treatment
Lenders sometimes require detailed specifications for items that affect value. If allowances are vague, appraisers or underwriters may ask for more documentation or assign less value. Share your selection sheets and invoices with your lender as you finalize choices.
Holdbacks and closing funds
Lenders or builders may retain funds until items are installed and inspected. If your selections exceed allowances, plan for extra cash at closing if the loan does not cover the difference. Coordinate early with your lender so there are no surprises.
FHA and VA considerations
Government-backed loans have program-specific rules for inspections and disbursements. If you are using FHA or VA financing, confirm how allowances and holdbacks are handled and whether additional documentation is required.
Goshen and Elkhart County factors
Permits and inspections
Building permits and inspections are handled at the city or county level depending on where your lot sits. If you are inside Goshen city limits, contact the City of Goshen Building Department to confirm permit requirements, inspection schedules, and any local code amendments. For projects outside city limits, check Elkhart County Planning and Zoning and the Health Department for zoning, septic, and well approvals.
Utilities and site costs
Confirm water, sewer, stormwater, and utility tap fees with City of Goshen Utilities or county utility providers. These fees and connection work are often outside the allowance and can be owner costs. If you need a septic system, factor in design and permit fees and confirm requirements with the county health department.
HOA, covenants, and assessments
New subdivisions may have impact fees, road assessments, or design guidelines. These can affect exterior allowances for landscaping, driveway width, or exterior lighting. Review covenants early so your exterior selections and budget match the rules.
Seasonal timing
Northern Indiana winters can affect schedules for concrete, exterior finishes, and landscaping. If work must be delayed until warmer months, clarify how that impacts allowance disbursements and whether any credits will be issued if items are deferred.
Smart selection strategy
Before you sign
- Ask for a detailed, itemized allowance schedule that clearly states what is included, including labor, delivery, taxes, and disposal.
- Request sample specification sheets for standard selections so you know baseline quality.
- Confirm how unused allowance credits are handled and when they appear on the settlement statement.
- Ask about change order markups or administrative fees and get them in writing.
- Get a selection deadline calendar for cabinets, countertops, flooring, appliances, lighting, and paint.
During selections
- Prioritize long-lead items like cabinets, countertops, and appliances first to avoid delays.
- Get written quotes and invoices for upgraded items so your lender can match documentation to the contract.
- Keep copies of all selection sheets, emails, and signed change orders in one shared folder.
Negotiation tips
- Request itemized bids and transparency on trade pricing when possible. Some builders pass trade discounts through.
- Consider asking for higher allowances where builders often underbudget, such as cabinets, countertops, or lighting.
- If standards are acceptable, negotiate smaller allowances paired with explicit credits for any unused funds.
Walkthrough and closeout
- At the final walkthrough, verify that installed items match your signed selections and invoices.
- Confirm that warranty and maintenance documents for appliances and major systems are included in your closing packet.
- If an allowance was underused, make sure the credit appears on the final settlement statement.
Quick checklist for your file
- Are allowances itemized with clear inclusions for labor, delivery, taxes, and disposal?
- Is there a written policy for unused allowance credits at closing?
- How are change orders documented, priced, and approved?
- What are selection deadlines and the consequences for missing them?
- Are upgrade markups or admin fees disclosed?
- How will the lender disburse funds, including any holdbacks or inspections?
- Who pays for permits, impact fees, and utility tap fees?
- Are brands, quality levels, and warranty terms for major items specified?
Real-world examples
- If your countertop choice ends up 1,500 dollars over the allowance, expect a written change order and to pay the 1,500 dollar difference unless a credit is agreed to in the contract.
- If your lighting package comes in under budget and the contract provides credits, you should see that credit on your closing statement. If the contract is silent, the builder may retain the difference.
- If an appliance has a long lead time and gets installed after closing, your lender or builder may hold funds until installation and inspection are complete.
Work with a local advocate
Builder allowances are manageable when you have clear documents, firm deadlines, and proactive communication with your lender and builder. In Goshen and across Elkhart County, local permitting, utility fees, and subdivision guidelines can shift your allowance math. A hands-on advisor helps you align selections with your loan, keep the schedule moving, and protect your bottom line.
If you want concierge-level guidance from lot selection through closeout, connect with Mike Lee's Team. You will get local insight, new-construction expertise, and a streamlined path to a home that fits your plan.
FAQs
What is a builder allowance in a Goshen new-build?
- It is a budget placeholder in your contract for items you will select later, such as cabinets, flooring, and appliances, with the final cost reconciled against that amount.
How do allowance change orders affect my mortgage approval?
- Price increases from selections are documented by change order and may require lender notice, re-underwriting, or extra cash at closing depending on the loan.
Will I get a refund if I spend less than the allowance?
- Not always; only contracts that specify buyer credits for unused allowances provide refunds, so get that language in writing before you sign.
Who handles permits and inspections for a build in Goshen?
- The City of Goshen manages permits and inspections inside city limits, while Elkhart County agencies handle projects outside the city depending on location and systems.
Do allowances usually cover water and sewer tap fees in Goshen?
- Often no; tap fees and connection work are frequently owner costs outside allowances, so confirm details with City of Goshen Utilities or your builder.
What should I bring to my first builder meeting in Elkhart County?
- Bring a desired features list, an itemized allowance request, questions about credits and fees, and a target selection timeline you can share with your lender.
