Mortgage activity has cooled a bit after an energetic start to the year — and the reason is pretty simple: interest rates haven’t given buyers much new to get excited about.

Recent survey data from the Mortgage Bankers Association (MBA) shows mortgage applications slipped slightly for the second week in a row. Overall demand dipped, homebuying applications eased, and refinancing barely moved. Translation? Many buyers are watching rates closely… but they’re also getting creative.

Instead of waiting around for a big rate drop that may or may not come soon, more borrowers are turning to loan options that can lower their upfront costs or reduce their monthly payment — at least in the short term. Two choices in particular are getting more attention: FHA loans and adjustable-rate mortgages (ARMs).

What’s happening with mortgage demand?

After several weeks of strong growth earlier in the year, applications have started to level off. MBA’s latest weekly numbers showed:

• Total mortgage applications dipped slightly week over week

• Purchase applications edged down

• Refinancing rose only modestly

This slowdown lines up with what many buyers are seeing in real time: mortgage rates have been hovering in a tight range rather than falling steadily. Early on, that “stable-but-a-little-lower” rate environment brought a wave of excitement — especially for people hoping to refinance. But when rates stop improving, many borrowers pause, reassess, and adjust their strategy.

Why borrowers are shifting toward FHA loans

As affordability remains the biggest hurdle for many buyers, FHA loans are becoming more appealing again.

FHA loans are backed by the Federal Housing Administration and are designed to make homeownership more accessible — particularly for first-time buyers or those who don’t have a large down payment saved. While every borrower’s situation is different, FHA loans can offer advantages such as:

• Lower down payment requirements compared to many conventional options

• More flexible qualification standards in some cases

• Potentially lower interest rates than a standard 30-year fixed loan

When small differences in payment matter, even a modest rate advantage can be meaningful. Recently reported rate snapshots showed FHA rates running lower than conventional fixed rates — and that gap is one reason borrowers are paying attention.

Why ARMs are getting a second look

Another trend: more borrowers are considering adjustable-rate mortgages (ARMs).

An ARM typically offers a lower introductory rate for an initial period (commonly 5 or 7 years). After that, the rate can adjust periodically based on market conditions.

Why would someone choose that? For many buyers, it comes down to planning and flexibility:

• If you expect to move within a few years, an ARM can lower your payment during the time you actually own the home.

• If you anticipate a higher income later, the initial savings can help you buy now while keeping payments manageable early on.

• If you believe rates may decline in the coming years, an ARM could be a bridge strategy — especially if refinancing becomes attractive later.

It’s not a one-size-fits-all solution, but it’s a tool some borrowers are using to keep monthly costs within reach today.

Should you wait for rates to drop?

A lot of buyers are hoping for another rate dip — and that’s understandable. But the reality is that mortgage rates can react quickly to economic news, inflation data, and jobs reports. That means timing the market perfectly is tough.

A more practical approach is often:

• Focus on what you can control (price point, down payment, credit strength, loan structure)

• Compare scenarios with a trusted lender: FHA vs. conventional, fixed vs. ARM, and how each impacts your monthly payment and cash needed at closing

• Decide based on your timeline (How long you’ll live there? Are you planning to refinance? Is this a starter home or long-term home?)

The takeaway: buyers aren’t stopping — they’re adapting

When rates don’t move much, demand can slow because people feel like they’re waiting for a “signal.” But what the latest trend suggests is that many borrowers aren’t giving up on buying — they’re just shifting toward loan options that create breathing room.

If you’re thinking about purchasing, the best next step is to run a few side-by-side comparisons. Sometimes the difference between “not yet” and “we can do this” is simply choosing the right loan strategy for your goals.