The real estate economy is slowly but surely getting back on track and as you can notice, it’s starting to get better compared to the last few years when it experienced slumps due to recession. But there’s a great chance that another slowdown will occur if the Federal Housing Administration loans inflate.

Every time mortgage companies approve loans like hot potatoes, you can barely see a Federal Housing Administration loan on the list. This is because mortgage companies tend to allow almost anybody to acquire few hundred thousands of dollars no matter what their credit history say, while FHA is much stricter with their requirements to qualify for the loan. But with the situation nowadays where mortgage companies are tighter with their credits, borrowers start to approach FHA to get a housing loan. The FHA loans in the second quarter of 2009 went up to 23 percent compared to the 2.7 percent loans back in 2006. This inflation seems to be a problem for the FHA as many of their loans are quickly defaulting because of the high unemployment rate and rough economy.

There are also reports saying that if the FHA reserve level went down to 2 percent, which is currently in 3 percent, we might see the FHA discontinue or tighten their lending and witness the first time homebuyer exception fade away.