What is Dry Funding?

A mortgage loan origination where the funds are supplied after all of the required sale and loan documentation has been completed and reviewed by the mortgage banker. In the days before electronic signatures, the borrower’s wet ink signature dried during the time the mortgage banker reviewed the executed loan documents – hence the term “dry funding.” For the buyer and seller, dry loans provide more insurance that the transaction will be completed without problems and with less risk of fraud or mistakes. Conditions surrounding the requirements of dry funding differ from state to state. Some states mandate that all loans be funded via dry funding. Others only require certain finds of loan to be dry funded. In a dry-funded purchase money mortgage, the seller will not receive any money until all necessary paperwork has been reviewed by the lending financial institution. Waiting for the documentation to be processed before any funds are transferred ensures the legitimacy of the sale. This process helps to deter fraudulent activities in real estate transactions.