First Funding Blog

What is Wet Funding?

A mortgage loan origination in which the funds are obtained simultaneous or before all required documentation is completed. In other words, for a “wet” funding, the loan funds are generally to be available at the settlement agent at the time the borrower executes the loan documents. Before electronic signature technology, this was when the borrower signed the loan documents with wet ink – hence the reference to the term “wet funding.” Wet funding rules differ from state to state. Some states do not allow wet fundings. Some only permit them on select types of loans. In a wet-funded purchase money mortgage, the property seller will receive funds right away with the executed documents delivered to the mortgage banker after closing. Wet loans expedite the purchasing process by allowing the sale to occur before the paperwork is delivered to the mortgage banker. However, the added benefit of fast transactions comes at the price of increased risk. Because the seller receives funds before the paperwork is approved, the possibility of fraud and a loan default is greater.