The Department of Housing and Urban Development (HUD) announced Friday that FHA loan limits will decrease starting January 1, 2014.

Federal Housing Administration (FHA) loans are popular with first-time home buyers and repeat buyers alike, since they offer a way to buy a home with as little as 3.5% down, and loan amounts up to $729,750 in high-cost areas.

But for FHA loans originated in 2014, the maximum loan amount in high-cost areas will be lowered to $625,500. That’s a big decrease – $104,250 – and could affect many homebuyers’ plans to buy at the higher end of FHA’s limits.

Buyers in places like Los Angeles and San Francisco, California, New York City, and Washington, D.C., will need to secure other types of financing or make a more significant down payment to buy homes above $656,775 starting in 2014.

Lower limits in many parts of the U.S.

But the highest end of the threshold is only part of the story. Loan limits for many other areas of the country will experience FHA loan limit cuts as well. Here are a few examples:

Buyers in cities and counties across the U.S. should check new 2014 limits for their local area. If limits have been cut, they should apply for FHA financing as soon as possible to avoid the lower limits.

Check 2014 limits for high-cost areas and for cities affected by FHA’s new loan amount ceiling.

FHA Streamline Refinances & Reverse Mortgages Not Affected by 2014 Loan Limits

If you currently have an FHA loan, your ability to get an FHA streamline refinance will not be affected by the new loan limits, as long as you don’t get an appraisal.

However, traditional FHA refinances, like credit-qualifying FHA refinances and FHA cash-out refinances will be subject to the 2014 FHA loan limits.

The maximum reverse mortgage loan amount is not affected by the change. The 2013 limit for these loans is $625,500, which is already in line with 2014 standards for other FHA loan types. However, borrowers living in areas not at the FHA ceiling may see decreases in the maximum amount they can borrow with a reverse mortgage.

FHA “Floor” Limit Stays at $271,050

Many areas of the country are not considered “high cost” areas. The FHA loan limit in these areas will not change from 2013 to 2014, but will remain at these levels:

• One-unit home: $271,050
• Two-unit home: $347,000
• Three-unit home: $419425
• Four-unit home: $521,250

If your county or metropolitan area does not show up on the FHA’s list of high cost areas, these will be your maximum loan amounts.

Some Locations See Increased FHA Loan Limits

Some areas of the country have seen increased values over the past year. These areas were not already at or close to the maximum FHA “ceiling” limits.

An example is Houston, Texas, which saw an increase from $271,050 in 2013 to $295,550 in 2014. Austin, Texas likewise increased by $17,150 to a limit of $305,900 in 2014.

Although a majority of areas saw decreases, you might find that your FHA limit increased. If so, that means greater buying opportunities in your area.

Get an FHA Case Number before January 1, 2014

If you are in the market to buy a home with a small down payment, apply prior to the new loan limits. You must have an FHA case number by December 31, 2013. A case number is confirmation from FHA that you are applying for FHA financing, and only an FHA approved lender can request one. You must have a property address that you are buying and some personal information to obtain one.

This is especially important if you are looking in a high cost geographical area, or are buying a home that might be affected by the new loan limits.

Contact an FHA lender to get started and obtain your case number before the new limits are in place.