type to search

What's the difference between funding in a "wet state" and a "dry state"?

Asked by [ Editor ]

What's the difference between funding in a wet state and a dry state?

Is there a map to indicate which states are wet and dry?

or Cancel

2 answers



A loan is "wet" at closing (i.e. the ink is still wet on the note). When the mortgage note arrives at the lender (or their document custodian), the loan is then "dry". A "wet settlement" or "wet funding" occurs when the funds are advanced prior to the original signed mortgage note reaching the lender. With a "dry settlement", the funds are not disbursed until after the lender has the note.

The typical procedure in wet settlements is that the buyer and seller come to closing, the documents are signed, and the seller leaves with a check. In dry settlements, the buyer and seller sign their respective documents at the title company (though not necessarily at the same time). The title company sends the documents off to the lender to review. After the lender is satisfied, the loan funds and the seller receives the check. This usually takes a few days.

"Wet states" are states that have laws in place that compel wet settlements. These are generally limits on how much time can elapse between the closing documents being signed and the loan funds being disbursed which make it difficult or impossible for the note to arrive at the lender before the lender is required to fund the loan.

A rule of thumb is that states east of the Rockies are usually wet states, and states west of the Rockies are usually dry states. DocMagic has a list here:

or Cancel

humbug [ Editor ]

First of all, in regards to real estate and mortgage lending, this has nothing to do with alcoholic beverages! Rather, this refers to the laws and customs in different states regarding when a new mortgage loan is closed and when new buyers may take possession of the property.

"Wet States", states that have "Wet Settlement" laws, require lending banks to disburse funds within a period of time. Depending on the states' Wet Settlement laws, some require the disbursement of funds to the sellers and other involved parties on the day of the settlement, others within 2 days of closing. Wet Settlement laws are in place to curb the bank practice of delaying funding after closing documents have been signed by the borrowers.

All of the prior to funding conditions must be met in order for the lender to allow doc to go to closing in Wet States.


or Cancel

Your answer

You need to join Mortgage FAQ to complete this action, click here to do so.