In a move that will help thousands more families become home owners, Uncle Sam has raised the bar on mortgages insured by the Federal Housing Administration.

As of Jan. 1, the FHA will back loans of up to $239,250 in 19 high cost areas, including 11 in California, and up to at least $132,000 elsewhere.

The higher limits represent an 8.83 percent increase over this year's ceilings, which were $219,849 in the nation's most expensive markets and $109,032 in places where housing costs are more reasonable.

The FHA doesn't make loans directly to home buyers. Rather, it indemnifies private lenders against losses when borrowers fail to make their payments.

The agency insures more than 1.25 million mortgages a year, mostly to first-time buyers who cannot meet the more rigid requirements of conventional financing. In addition, about three out of every five mortgages made to African Americans and Hispanics are backed by FHA insurance.

Government-insured loans is often considered the financing of last resort. Without the government's backing, these buyers would be forced to either forgo their home ownership aspirations or pay rates that are substantially higher than those charged by FHA-approved lenders.

But because insurance is paid for by borrowers, the higher limits will not cost taxpayers any money. Indeed, the FHA's standard mortgage insurance fund is currently so flush with cash the agency reinstituted a refund program that has been stopped for nearly half-a-dozen years.

FHA loan limits are set by county and tied to increases in the ceiling placed on "conforming" mortgages purchased by Freddie Mac, a key secondary market institution which buys loans from local lenders and packages them into securities that are sold to investors throughout the world.

By law, the basic FHA limit, or "floor," may not be less than 48 percent of Freddie Mac's ceiling. The "ceiling," or limit in high cost areas, may be no more than 87 percent of the Freddie Mac limit or 95 percent of the area's median house price, whichever is less.

In late November, Freddie Mac and its chief rival, Fannie Mae, said they would raise their limits 8.83 percent, from $252,700 to $275,000 effective Jan. 1 in accordance with the latest government housing price index. And FHA Commissioner William Apgar announced the new government limits a few days before Christmas.

The delay is normal because every year the agency has to re-evaluate 3,200 counties.

While only 19 counties are at the maximum, some 650 are between the two limits. The others are at the floor.

However, in some places, the FHA limit won't go up because 95 percent of the area median is the lower of the ceiling-setting formula's two benchmarks. Even in some more expensive areas, the old maximum did not change or went up but not to the limit.

The higher ceilings also apply to government-insured rehabilitation loans, which allow buyers to roll into a single mortgage the cost of acquiring a house and fixing it up, and reverse mortgages, which permit senior owners age 62 or older to convert their equity into cash without having to sell or move out of their homes.

The FHA's new basic limit for two to four-unit houses are $168,936 for a two-unit buildings, $204,192 for three-unit structures and $253,776 for four-unit buildings. In high-cost areas, the new ceilings are $306,196 for two-unit, $370,098 for three and $459,969 for four.

A complete schedule of FHA loan limits is available on the Internet at www.hud.gov/fha.