Congress yesterday agreed to restore to previous levels the maximum loan size you can get when you use the Federal Housing Administration’s mortgage program to buy a home or refinance your current mortgage in high-cost real estate markets.

The change will help make mortgages more affordable and accessible for middle-class families — nearly two-thirds of home buyers who will be helped by the loan limits provision have incomes below $100,000, NATIONAL ASSOCIATION OF REALTORS® data shows.

“It’s a misconception that only wealthy borrowers benefit from the maximum cost loan limits; middle-class home buyers living in all areas of the country deserve the same access to affordable mortgage financing and the same opportunity to achieve home ownership that home buyers enjoy in the most affordable regions of the country,” said NAR President Moe Veissi.

For the next two years, FHA’s maximum loan size will be $729,750 in the country’s most expensive housing markets, like San Francisco and New York. The changed limit will also influence mortgage sizes in many other less-expensive markets — it had dropped by an average of $68,000 in nearly 600 counties and 42 states when a federal stimulus plan that raised the limits to support housing ended in September.

In the most affordable housing markets, the biggest loan FHA will insure is $271,050.

The higher loan limit is important to home owners because consumers whose mortgages are too large for FHA have to pay so-called “jumbo” mortgage rates, which this week were about 0.5% higher than FHA-guaranteed loan rates.

Home buyers who use FHA loans can typically make smaller down payments, pay a lower interest rate, and may have an easier time qualifying for a loan. Home sellers benefit from a higher loan limit because it increases the pool of potential home buyers who can use safe, affordable FHA loans.

The reinstated loan limits are set to expire in two years. “The reinstated loan limits will help provide much-needed liquidity and stability to communities nationwide as tight credit restrictions continue to prevent some qualified buyers from becoming home owners and the housing market recovery remains fragile,” he said.

Congress didn’t raise the loan limits for Fannie Mae or Freddie Mac, which can guarantee loans up to $625,000. The two mortgage market giants were criticized on Capitol Hill this week for paying their CEOs about $3 million each to manage the companies’ combined $5 trillion mortgage portfolios.

Flood insurance

The bill also provides for a short-term extension of the National Flood Insurance Program through Dec. 16, 2011. That gives Congress about a month to work on a proposed five-year reauthorization of the program, which would ensure access to affordable flood insurance for millions of home and business owners across the country.