Believe it or not, within the real estate industry, these terms do not concern the sale or distribution of alcoholic beverages. It pertains to the period where a new buyer can take over a new property as soon as the mortgage is regarded as closed.
“Wet payment laws” require that lending banks pay out funds during a certain timeframe as soon as the closing date of the mortgage, which may change according to the specific state in which the loan was taken out. Laws vary and disbursement time can range from the day of payment to within two days of closing. Deliberately invented to shield the consumer against bank fraud, these laws prevent lending banks to delay funds dispersal after the necessary papers have been signed.
Slang expressions, “wet funding” and “dry funding” concern the state where the funding began. “Dry” states refer to those states where the paperwork required to officially close a loan does not need to be concluded on the day of closing. Wet funding is stricter and requires that all the necessary documents needed to close the loan must be ready and approved at the period of closure.
Alaska, Arizona, California, Hawaii, Idaho, Nevada, New Mexico, Oregon and Washington are considered dry funding states and all of the rest are as wet as they come. Literally speaking, a dry closing is not a closing, and it happens solely for the seller’s and buyer’s comfort. It occurs when the parties convene to sign documents, but no funds are distributed at this juncture.
A deterrent to fraud, dry funding assures the legality of the deal. There is more risk with a wet loan as the transaction moves along at a quicker pace and the seller receives money very quickly as soon as the closing of the sale. With the sale happening before the paperwork is concluded the comfort and speed must be weighed against the distinct possibility of real estate fraud. The documentation up for evaluation in the case of a wet loan is received as soon as the funds have been disbursed, kind of like that ancient saying about putting the cart before the horse.
You can be aware of the disparity between wet and dry funding by doing a study on these matters. Approaching home loans with care is always the greatest protection against bank fraud.
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