Standard FHA loan limits for areas where housing costs are relatively low will remain unchanged at $271,050 in 2014, but the new ceiling for the highest-cost areas will come down from $729,750 to $625,500 on Jan. 1,  the Department of Housing and Urban Development announced today.

“As the housing market continues its recovery, it is important for FHA to evaluate the role we need to play,” said FHA Commissioner Carol Galante in a statement. “Implementing lower loan limits is an important and appropriate step as private capital returns to portions of the market and enables FHA to concentrate on those borrowers that are still underserved.”

Approximately 650 counties will have lower FHA limits as a result of this change, which is being implemented as higher limits established by the Economic Stimulus Act of 2008 as emergency measures expire.

Last month, Fannie Mae and Freddie Mac’s regulator said it would leave in place the $417,000 conforming loan limit that’s the ceiling for the mortgage giants in most markets, instead of reducing it to take into account home price declines seen in many markets during the bust. Fannie and Freddie will continue to purchase and guarantee mortgages of up to $625,500 in high-cost markets, including parts of California and New York.

More details on the new FHA limits, including county limits, are available at

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