If you are purchasing a home, unless you are doing so with all cash, you will probably need money from your lender to complete the transaction. One of the most important parts of the closing process is how your lender will fund your loan.
In the race to remove your loan and appraisal contingencies per the contract, often times not all of your approval conditions are signed off by your lender when you are ready to release contingencies. Therefore, whatever conditions are left over or essentially moved to the closing process, linger around and can cause delays.
Unfortunately, with everything else that goes on during the transaction, the closing process is usually not a popular topic of conversation upfront but it’s a good idea to ask questions.
For example, there are several common terms used to describe the closing process of your lender. They are wet-, dry- or table-funded options and fast-track program. These terms can vary from state to state and from lender to lender as well.
However, there’s a distinct difference between them. Let’s start with table funding. According to the federal Department of Housing and Urban Development (HUD), “in a table-funded transaction, the mortgage company originates, processes and closes the loan in their own name and, at or about the time of settlement, there is a simultaneous advance of the loan funds by the lender and an assignment of the loan to that lender.”
A “wet funding” means that your lender must follow the wet payment laws of a particular state that demand that banks pay out money during a specific period of time as early as the closing date of the loan. Disbursement times may differ depending on the state where the mortgage took place and can range from the date of closing to within two days afterward.
Under a wet funding process, all of the paperwork needed to officially close your loan must be completed and approved on the exact day of loan closing. Although they are a bit different, table and wet funding terms are commonly interchanged.
In California and several other states, a “dry funding” process is predominately followed in which there is no money available at the closing table. Instead, all parties meet to sign their closing loan documents and those documents are subsequently returned to your lender for review.
Once the review is done, the funding wire is sent to the settlement agent. After receipt of these funds, the recordation of the appropriate documentation will take place and all proceeds get disbursed.
Lastly, there is a fast-track program. Generally, this is used in dry states like California to speed up the closing process. If all parties sign their paperwork and it’s scanned or faxed back to your lender early enough in the same day, then your lender will review it that day too.
Assuming there are no further items needed, your lender will be able to pre-fund your loan on that day in expectation of receiving the required original signed documentation via overnight mail.