Conventional

Conventional financing generally refers to loans that are not insured or guaranteed by a government agency such as HUD, GNMA, FHA or VA. This is a type of mortgage in which the underlying terms and conditions meet the funding criteria of Fannie Mae and Freddie Mac, which are Government Sponsored Enterprises (GSE).

The maximum conforming loan limit is adjusted each year to account for the change in average home sale prices nationwide. For 2010, the maximum conforming loan limit in the San Francisco Bay Area is $729,750, and it will remain at that level through 2011.

Most loans in high cost areas, such as the San Francisco Bay Area, have been conventional loans until 2008, when the loan limits were substantially increased for government financing.

Borrowers who have at least 20% of the purchase price as a down payment will find that conventional financing usually offers the lowest payment when compared to FHA financing, which requires the additional cost of mortgage insurance.