HOMES: Jumbo mortgages will be defined as $625,500.

People looking to buy more expensive homes next year will have fewer options to find financing because Fannie Mae and Freddie Mac will have lower limits on the size of loans they can buy.

The changes, effective Jan. 1, will lower the limit in Los Angeles and other high-priced real estate markets to $625,500, down from $729,950. Consumers who need to take out mortgages above that amount typically pay higher interest rates for a so-called jumbo loan, which can price some would-be buyers out of the market.

For example, jumbo loans typically used to finance more expensive homes remain hard to obtain.

Before credit standards were tightened in August 2007, some 40 percent of Southern California home sales were financed with jumbo loans. In September, they accounted for just 13 percent of loans used to finance homes costing more than $417,000, said San Diego-based MDA DataQuick.

Loan limits vary by metro area and are based on the local median house price. So falling home values in some markets have pulled the loan limits down with them.

In the Boston area, for example, the limit will fall to $465,750 from $523,750. In the Baltimore area, it is scheduled to drop to $494,500 from $560,000.

And while the limit in the Los Angeles metro area will drop to $625,500 it will fall to $598,000 in neighboring Ventura County.

The Federal Housing Finance Agency, which egulates Fannie and Freddie, kept the limit for lower-cost metro areas at $417,000.

Lawmakers temporarily raised the loan limits for Fannie and Freddie in an economic stimulus bill passed in February and revised them in a housing bill passed over the summer.

There are fears that the reduced limits will hurt the housing market next year. Fannie and Freddie have become the dominant source of mortgage funding since last year’s collapse of the subprime lending market.

The National Association of Realtors is pressing lawmakers to keep the limit at $729,950.