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Wet vs. Dry Funding: Understanding the Differences in Mortgage States


Are you in the process of buying a home and feeling confused by the terms "wet" and "dry" funding? Don't worry, you're not alone! These terms refer to the different ways that mortgage transactions are funded, and the rules can vary depending on the state you live in.

In a wet funding state, all funds must be transferred and received by the seller and their representatives before the sale is considered complete. This means that the funds for your mortgage must be in the hands of the seller or their representatives before you can take possession of your new home.


On the other hand, in a dry funding state, the sale is considered complete once all necessary documents are signed and the title is transferred, even if the funds haven't yet been transferred. This means that you can take possession of your new home before the funds have been received by the seller. So, why do these differences matter? For one, it can impact the timeline of your home purchase. In a wet funding state, you may need to schedule your move-in date later to ensure that all funds are received in time. In a dry funding state, you may be able to move in sooner, but you'll still need to ensure that the funds are transferred as soon as possible.


Additionally, it can impact the process of your mortgage transaction. In a wet funding state, all parties involved will need to ensure that the funds are available and ready to be transferred on the day of closing. In a dry funding state, there may be more flexibility around the timing of the fund transfers.


It's important to note that not all states are strictly wet or dry funding states. Some states may have a combination of wet and dry rules or may have specific requirements around fund transfers that differ from other states.

Understanding the differences between wet and dry funding states can help you navigate the home-buying process more confidently. By knowing the rules and regulations of your state, you can better prepare for the timeline and requirements of your mortgage transaction.






Disclosure: For Change Financial only recommends products we would use ourselves. All opinions expressed here are our own. This page may contain affiliate links and we may earn a small commission, at no extra cost to you. Read our full privacy policy on our website.

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