What Is a Wet Loan?

A wet loan is a mortgage in which the funds are realized at—or with the completion of—a loan application. Submission of other required documentation for closing the properꦕty, such as surveys and title searches, happens after the dispersion of funds.

Wet loans allow the borrower to purchase prജoperty more rapidly and to complete the necessary do💖cumentation after the transaction. Conditions surrounding the use of wet loans differ based on state laws, and not all states allow a wet loan.

Understanding a Wet Loan

​​​​​​​In a wet-funded mortgage, the borrower receives money when their loan is approved. The borrower may then purchase the property and complete the other required๊ documentation to officially transfer the property title. After funds transferunds, the bank will obtain the loan documentation for review. Wet loans expedite the purchasing process by allowing the sale to occur before the paperwork is completed.

Wet Loans vs. Dry Loans

With wet-loan transactions, speed comes at the price of increased risk. The likelihood of fraud and loan default is significant with a wet loan. The risk comes from the seller receiving funds before the review and approval of the loan documentation. If, aﷺfter evaluation, the bank determines the loan is too risky, it faces great time and expense in revoking the mortgage.

In contrast, a dry loan is one where the release of funds is after completion and review of all necessary sale and loan documentation. Dry funding provides an added layer of consumer protection and h🎉elps to ensure the legality of the transaction. With a slower closing process and no funds disbursed at the closing, there’s more🎉 time to address or avoid issues.

Dry loans date to pre-electronic banking days, when property buyers and sellers often lived far apart from one another and their mortgage lenders, so transactions took longer. The dispersal of funds happens when the mortgage is🐼 considered officially closed. The new owner can take possession of the property at this point.

Wet Closings vs. Dry Closings

Wet loans may go through either a traditional closing or a 澳洲幸运5官方开奖结果体彩网:dry closing. A real estate closing is the completion♔ of a transaction involving selling or exchanging real property. A conventional closing consists of the following e✃vents:

• All necessary buyer and seller documentation is completed.
• The property title transfers to the purchaser.
• All funds pending are settled.

In contrast, a dry closing takes place for the benefit and convenience of both the buyer and the seller, but in itself, it is not technically a closing. A dry closing usually occurs when there is a delay in the loan funding and the buyer and seller are geograp🍨hically separated. Dry clos🌟ings allow for the signing of documents, but no money changes hands.

Special Considerations for a Wet Loan

Wet loans are permitted in all states except Alaska, Arizona, California, Hawaii, Idaho, Nevada, New Mexico, Oregon, and Washington. States that have wet-settlement laws require lending banks to disburse funds♑ within a certain period. Some require payment to the sellers and other involved parties on the day of the settlement; others allow pay♉ment within one or two days of closing. Wet-settlement laws are in place to curb the bank practice of delaying funding after the borrowers sign the closing documents. All of the before-funding conditions must be met for the lender to allow closing in wet states.

The Bottom Line

Borrowers hoping to close quickly on a home might get a wet loan to expedite the mortgage process. While it speeds up funding, getting a wet loan isn't without risks. Borrowers might take out more money than they can realistically afford, which makes them risky to lenders.