DEFINITION of 'Dry Loan'

A mortgage where the funds are supplied after all of the required sale and loan documentation has been completed and reviewed. For the buyer and seller, dry loans provide more insurance that the transaction will be completed without problems. Conditions surrounding the requirements of dry loans differ based on state laws.

BREAKING DOWN 'Dry Loan'

In a dry-funded 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 deters fraudulent activities in real estate transactions.

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