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Before you sign! Understanding Your Allowances.

You found the perfect lot and finalized your dream house plan. What’s next? Well, your builder will come up with a quote to build the house. They will itemize the anticipated costs of building the house and include allowances for things you will need to select. According to Christy Bieber on, “an allowance is used when the exact price of items in your home isn't known, but the builder allots up to a certain amount of money for it.”. It’s likely that you have a limited idea of what things will cost as you begin this process, so the quote might be a little overwhelming. To make sure you don’t end up with unexpected expenses later on, be sure to follow the guidelines below before signing on the dotted line.

  • Allowances are not an exact science, but you will need to make sure your allowances are realistic. Getting the details behind the numbers is important. If you want quartz countertops, but the allowance is based on laminate, you’re going to end up with a very unpleasant surprise! Talk these through with your builder so you have a complete understanding of what they included to come to your allowance total.

  • Builders typically have selected vendors that they work with closely. First, make sure your builder will allow you to work with outside vendors. Some don’t, but if they do, be sure you understand how payment will be made if you use a vendor that is not on their list. You may have to pay any upfront costs or down payments with outside vendors. If you’re on a tight budget, that could derail you as your build progresses. With so many people using vendors like Wayfair and Amazon, out-of-pocket costs can sneak up on you!

  • Discuss with your builder how overages will be handled. If your cabinet allowance is $20,000 and you spend $25,000, will you have to pay the vendor? The builder? Or can this be incorporated into your mortgage?

  • There are many items that don’t fall under an allowance and can vary when it comes time to order. The cost of lumber has recently been an issue for new home builders. Talking to your builder about those items and ensuring that your cost is locked in when signing is important. Be aware, though, that if you lock numbers down, you will likely not be able to take advantage of decreasing costs!

  • Research which items might be better if you plan to supply them yourself. You may want a specific appliance brand that their vendor doesn’t carry. If you know this ahead of time, it can’t hurt to have a conversation with the builder and work out an agreement, especially if you don’t want to pay out-of-pocket or need the costs included in your mortgage.

There is a lot to absorb when you’re going through this process. For more detailed information about allowances and their pros and cons, read more from Christy Bieber, personal finance and legal write at

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