Homeowners need to clean out eaves troughs and spouts from debris like leaves- making sure that water will flow where it is intended to- away from the home’s foundation.

Now is the time to get non-electric heating systems serviced, before the cold sets in- along with the busy season. Also check chimneys and combustion vents for debris.

Remove dust from around baseboard heaters. Also vacuum forced-air vents to get rid of all dust and debris for most efficient, less hazardous flow of air when you do turn the heat on.

If there is an HRV with the property, go outside to make sure that the air intake grille is free of debris. Also make sure that it is turned on - and set to the right speed.

Make sure well water is of acceptable quality; remove obstructions from sump pumps, and make sure that they will function as they need to during a flooding emergency. For septic tanks, if they need to be emptied, now is the time.

Looking at the exterior of the home, remove screens, and make sure all windows and doors seal tightly and take care of any drafts before the cold weather comes.

Make sure that the foundation is well protected before the snow flies. Do a walk about, and look at the lay of the land. Is there anything present that will prevent the flow of water in a thaw away from the home, instead directing it back towards the foundation?

It is also time to come to grips with the fact that backyard BBQ’s are nearing their end. Towards the end of the month, look at storing patio furniture and wrap up vulnerable shrubs and bushes to protect from the elements.

Pre-Approved or Pre-Qualified?

Both these terms are now used to describe the action of seeking a mortgage approval before actually negotiating a property purchase. Unfortunately, in most cases, the borrower is not really fully approved for the mortgage & the lender does little or nothing to actually qualify the borrower.

What actually occurs is the typical lender provides an interest rate guarantee for a period of time, usually to a max of 120 days. The borrower is advised that they are "pre-approved" & can begin shopping for a home.

At the pre-approval stage, many lenders do not review credit or even determine if the client meets their guidelines for income & down payment.   Lenders do not begin the actual qualification process until the file goes 'live' (meaning the Borrower now has an accepted Contract of Purchase). At this point the lender will begin a serious examination of the borrower's qualifications & may refuse to proceed with the pre approved mortgage for a wide variety of reasons. Because of this, it is very important for purchasers to keep their offer to purchase 'subject to mortgage approval'.

If rates have risen since the original "pre-approval" & the lender now declines the mortgage, the client may no longer be able to get as good a rate elsewhere. Borrowers can reduce the chance of disappointment & get full approval faster by working with a professional Mortgage Broker early in the process. A broker will often recognize potential concerns & address them directly with lenders at the time the "pre-approval" is requested. It may even be prudent to gather employment & income documentation at this stage, particularly for individuals who are self-employed or have had changes or inconsistencies in income or employment. Gathering documents early also helps reduce stress & waiting time after that hard search for the right property at the right price!

What are the risks of writing an offer to purchase without a financing clause? Many.

Let’s say you have a team of professionals who have worked with you to get you as ready as you can be to make that offer to purchase. Your team should consist of an Accredited Mortgage Professional and an experienced Realtor – a Realtor who knows how to present your offer to purchase in the best light and sell the vendors on why they should accept your offer. Your Accredited Mortgage Professional will have pre-approved you to purchase, pulled a credit bureau, provided you with parameters for affordability, assembled your income and down payment verification and provided you with a mortgage pre-approval subject only to CMHC or a satisfactory appraisal of the property. You may be tempted to write an unconditional offer to purchase because your Mortgage Professional has indicated that you look strong and you have passed the test on affordability and credit, right?

But your mortgage financing approval is not based on you alone. The lender and the insurer (CMHC, Genworth Financial or AIG) also need to pass their approval on the property too. The property is the physical collateral for the loan, and your covenant (personal strength credit wise and ability to repay the loan) and the property itself both become part of the approval process. In high ratio mortgage approvals, the insurer (CMHC, AIG or Genworth) have the final say. In conventional properties, the approval will be subject to an appraisal to confirm value.

Here’s what could go wrong:

For example, let’s say you have 5% down payment, plus your closing costs. It is a bidding war, so you come in with your strongest offer, and bid well over the asking price. It is within the price range that your Accredited Mortgage Professional has advised you on the affordability test. The deal is submitted by the lender to CMHC for their approval. CMHC compares the property value against recent and comparable sales in the area, and determines that they will not support the value you offered. They may request a full appraisal of the property. If, for example, you bid $240,000 on the property and CMHC assesses the maximum value of $230,000, they will only allow a maximum mortgage of 95% of $230,000. You would be responsible for the shortfall in the down payment. If the offer to purchase was not subject to financing, and you could not cover the shortfall in the extra down payment, you could be subject to losing your deposit and risk being sued for damages. In reality, you have paid too much for this property and because the offer to purchase was unconditional, the contract would be binding.

Another scenario is that CMHC requests a full appraisal on the property. The appraiser comes back with a report that there is a foundation problem, and they are not willing to insure at all. Or in conventional financing, the value may again effect the purchasers in the amount the purchasers have to provide as down payment.

My recommendation is that if you are requiring mortgage financing, you should always put in a financing condition - for your own protection. If you've written an offer subject to financing and CMHC doesn’t approve the property, you'll be disappointed, but protected. If you've written an offer unconditional and you don't get your mortgage financing, you'll lose your deposit and risk being sued for damages.

I will do a thorough job of getting you as ready as I can for your purchase. All your documentation will be on file before you write your offer, so the financing condition can be completed in just a few days. If you have an experienced Realtor to negotiate with the vendors, writing a financing condition should not prohibit you from getting the home of your dreams. There are many Realtors who are very successful at winning bidding wars that always include a financing condition.

Misconceptions occur in every business and the mortgage business is no different.

A recent example is this post by Boomer & Echo (B&E), a prominent blog that we typically enjoy. In it, B&E opines on why not to use a mortgage broker.

In the piece, the author gets some stuff wrong. As often happens, we came across it in our weekly blog scan and feel obliged to offer some counterpoints.

B&E makes four claims. They are:

Brokers push 5-year fixed rates.

Counterpoint: Brokers sell a higher ratio of variable-rate mortgages than bank salespeople, and have for quite some time. That’s per executives we’ve questioned at banks with both broker and retail channels (e.g. CIBC and Scotiabank). In general, however, all mortgage professionals (bank or broker) sell a lot of 5-year fixed product. It’s the most popular term (has been for decades), it’s the easiest to qualify for, and it has the most competitive discounting (albeit, not presently).

Loyalty to your bank pays.

Counterpoint: The Bank of Canada concluded exactly the opposite (more). To summarize, its research found that existing customers pay more than new customers. What’s more, no one lender continually has the best mortgage options. By comparison shopping, good brokers can save homeowners interest and identify the lender with the right flexibility/value tradeoff. The best brokers provide expert term analysis, proper deal structuring and helpful strategies to reduce a borrower’s amortization.

Bankers have better reputations

Facts: The RBC specialist incident last April proved that reputation should be judged individually, not by virtue of where a mortgage advisor works. Generally, brokers and bank specialists are both paid by commission and the commission is similar whether they sell a 5-year fixed or variable. Neither is holier that the other in that respect, except that bank reps are hired to push only one brand.

You're better off doing it yourself

Counterpoint: We have visions that people will someday get a mortgage online like they buy a stock at iTrade. But we’re not there yet. Good brokers provide counsel that saves time and money. Do-it-yourselfers sometimes discount the value of advice, mesmerized instead by brokers/bankers who can save them a few basis points in rate. For most, that’s a mistake because:

Few individuals grasp the mortgage math needed to perform proper term selection. Term selection impacts borrowing cost far more than rate selection. A “good rate” alone does not equal a “good deal.”

There are lots of creative techniques that skilled advisors can use to help people whittle down principal quicker.

Lenders rarely disclose all of their mortgage restrictions until you sign their contracts. Brokers know the benefits and pitfalls of multiple lenders, and advise borrowers in advance.

It is possible to pick your own investments, do your own taxes or write your own will, but people still hire financial planners, accountants and lawyers. There’s only so much time in a day and we can’t specialize in everything.

In all of those industries there are great and not-so-great practitioners. Brokers are no different. Interview several before picking one. Ask questions like:

Which lenders they use most often and why?

How long they’ve been in business full-time?

Why their term recommendation is mathematically sound for your specific needs?

Sense if you can trust them. If they seem to care about you, are competent and make you feel comfortable, you’ll be glad to have them on your side.

Rob McLister, CMT