If you’re researching about loans and mortgages, the several types that will pop up every now and then can make both terms seems endless with options.
There are tons of mortgages and loans out there and you only have to find the right one that suits your needs to get stated.
While some types of loans and mortgages are very well-known, others aren’t so popular among consumers – though many experts know what they are.
What Does A Dry Loan Mean?
The term dry loan refers to a precise type of mortgage where the money asked for is given after all of the necessary sale and loan paperwork has been completed and assessed.
This means dry loans offer additional insurance that the deal will be completed without any hiccups and this gives both the buyer and the seller more confidence.
The requirements of dry loans vary by state and they are different as a result of state laws.
Understanding Dry Loan Process
A dry loan is a type of mortgage. It is considered a debt instrument obtained by the collateral of a precise property which enables people and businesses to acquire real estate without offering payment for the complete value of the home as a down payment.
The individual or business entity pays back the loan along with the interest and this is done with a prearranged method of payments. The payment is made over a certain number of many years. The payment continues until she or he finally becomes the property owner.
However, if the borrower fails to pay back the mortgage, the lender has the right to foreclosure.
Otherwise known as a dry funded mortgage, in a dry loan the seller is not given any form of payment from the lender until all the paperwork involved in the loan has been completely reviewed and processed by the institution acting like a lender in this case.
As such, dry funding offers an extra form of consumer protection to guarantee that the deal is absolutely legal.
Nonetheless, dry loans do not have a fast closing process – unlike other loans. Also no funds are paid out during closing as such it allows more time for any problem that pops up to be resolved.
Dry mortgages are of several different types. One of such is the fixed-rate mortgages. In this situation the borrower is required to pay an equal interest rate throughout the loans lifespan.
The other is adjustable-rate mortgage and it makes use of a fixed interest rate at first for some period of time as well as rates that changes with market rates as time goes on.
How Dry Loans Measure Up With Wet Loans
A wet loan is the direct contrast of a dry loan. A wet loan is also a type of mortgage. However, in a wet loan, all the money requested for the loan are received prior to the vetting or completion of all necessary and required documents.
This makes it possible for the borrower to buy property at a quicker rate and gives the borrower enough time to finish the mandatory documentation at the end of the transaction.
Similar to dry loans, wet loans laws are determined by the state. Wet loans are allowed in many states unless the following:
- New Mexico
So make up your mind about the type of loan you want before requesting for it.