For most purchases in California, the loan is not immediately ready to fund after a borrower signs their loan documents. The “funding package” (signed loan documents and escrow conditions) needs to go back to the lender so a designated “funder” can review the package to make sure everything is signed properly and all conditions are adequately satisfied. The “funder” will only wire funds to escrow once she is certain she has a complete file and gets the green light from the escrow company.
This funding review process is lengthy and can take from 1 to 4 days, depending on the lender and file specifications. This is important to understand because so many people think loans can fund immediately after signing.
DRY FUNDING STATES
Dry funding states include Alaska, Arizona, California, Hawaii, Idaho, Nevada, New Mexico, Oregon and Washington. All other states are “wet funding.”
The reverse of this is when lenders “wet fund” or “table fund”. Wet or table funding means that a lender is expected to have funds available at the time of signing, i.e., on the table, or while the ink is still wet. Some states outside of California require this by law, and it is common practice in most states East of the Rockies. All major loan conditions must be satisfied and signing and funding dates need to be set in stone before loan documents are drawn.
ADVANTAGES AND DISADVANTAGES: WET AND DRY FUNDING STATES
In CA, lenders can follow either wet funding or dry funding procedures.
We used to embrace dry funding b/c it allowed for more flexibility with signing and funding dates, and b/c wet funding requirements sometimes delayed loan documents.
We now, however, embrace wet funding b/c we have overcome the delay issues and b/c it offers several major advantages.
The biggest advantage is the certainty that a transaction will close once loan documents are signed.
Many borrowers are caught off guard with last minute “funding conditions” when we dry fund, and buyers love the “peace of mind” that comes with signing in a wet funding environment.
In addition, b/c wet funding wires are ordered ahead of time, the wires always come in early enough to make recording times (funds are literally sitting in escrow while the borrowers sign).
I should add that wet funding does still allow for minor last-minute conditions (signatures, proof debts are paid, etc.).
But, major conditions and contract changes (such as seller credits) need to be addressed before we draw loan documents.
Founder/Broker | JVM Lending
(925) 855-4491 | DRE# 01524255, NMLS# 335646