Why Choose Wet Funding States Over Dry Funding States Or Vice Versa

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These terminologies have nothing to do whatsoever with alcoholic beverages but everything to do with the real estate industry. It pertains to the period where a new buyer can take possession of a property as soon as a new mortgage is considered closed.

“Wet payment laws” require that lending banks disburse funds within 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. Variations in the law can cause disbursement times to vary from the day of settlement to within two days as soon as closing. Once the necessary papers have been signed, these laws protect the consumer by stopping lending banks from postponing payment.

Slang terms, “wet funding” and “dry funding” concern the state where the funding began. In “dry” states, the required paperwork required to formally close a loan can be deferred beyond the closing date. At the period of closure, wet funding requires that all of the required documents required to close the loan must be ready and approved.

The dry funding states are composed of: Washington, Alaska, Arizona, California, Oregon, Hawaii, Idaho, Nevada and New Mexico, and the wet ones are all of the others. A dry closing happens for the benefit and comfort of both the buyer and the seller and is not really a closing whatsoever. No funds are distributed and the parties meet only to sign documents.

Dry funding ensures the legitimacy of the sale and prevents counterfeit activities. There is higher danger with a wet loan as the transaction moves along at a faster pace and the seller gets funds very fast after the closing of the sale. With the sale occurring before the paperwork is completed the comfort and speed must be weighed against the clear possibility of real estate fraud. The bank gets the loan documentation for review as soon as the funds are disbursed in the case of a wet loan, which in a way is like putting the cart before the horse.

Do your research and understand the disparities between wet funding and dry funding. An educated consumer is always the greatest defense against fraud and you should always approach house loans with caution.

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Homer Simpson

Anyone who has ever worked in title or mortgage or even just sold or purchased property knows that wet funding is better - dry funding does not so much protect anyone as it delays the closing and causes more aggravation all around. By forcing banks to actually fund an approved loan, it removes another opportunity for unconscionable delays. The rare incidence of real estate fraud is generally not stopped by dry versus wet funding, as it is not usually discovered until after the loan closes. Good funds laws, which make it harder to close with a fraudulent cashiers check are of more use. There is a reason most states are wet fund states.


Nov 16, 2011 10:11 AM #1

I work at a Title & Escrow company in Hawaii...depending on who you google, we are both a dry funding state or a wet funding state....go figure

Oct 20, 2016 12:53 PM #2
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