Home buyers are looking for ways to lower their costs, particularly considering existing-home sales prices hit an all-time high in January ($396,800 nationwide). The National Association of REALTORS® also reported that a majority of metros in the fourth quarter of 2025 saw median home prices continue to climb, albeit at a slower pace than last year.
For home buyers having to reach deeper to afford homeownership, particularly first-time buyers, they’re exploring alternative lending options to lower their rate.
Adjustable-rate mortgages, rate buy-downs and Federal Housing Administration (FHA) loans are increasingly being used to help lower borrowing costs—even as 30-year rates are trickling down.
The 30-year fixed-rate mortgage has dropped to three-year lows, averaging 6.09% this week, Freddie Mac reported Thursday. The 15-year fixed-rate mortgage dropped to 5.44%.
It’s a big difference from a year ago, when 30-year rates climbed near 7%. For a home priced at $400,000, with a 10% down payment, a monthly payment at a 6.87% rate from a year ago versus this week’s 6.09% rate could result in nearly $200 in monthly savings.
Buyers Look Beyond 30-Year Mortgages
But faced with higher home prices, home buyers are looking past the most popular lending option—the 30-year fixed-rate mortgage—in trying to find savings.
“Adjustable-rate mortgages are seeing more attention, particularly among higher loan amounts, because these loans start with a lower rate,” says Shawn Yerkes, group president of financial services at Genstone Financial.
The share of adjustable-rate mortgages—with rates that reset after a five- or seven-year period—rose to a seven-week high of 8% of all home purchase mortgage applications in the latest week, the Mortgage Bankers Association reports. ARM rates were tracking nearly a full percentage point lower than fixed rates last week.
“Rate buy-downs from sellers also are popular,” Yerkes says. “They reduce payments for the first two to three years, helping buyers manage the initial costs of homeownership.”
Yerkes also notes growing interest in FHA loans, particularly among buyers with less stellar credit profiles and higher debt-to-income ratios. MBA’s latest data shows an uptick in FHA loans nationwide last week, coinciding with a declining FHA rate that is about 20 basis points lower than conforming 30-year fixed rates. FHA loans also may allow for down payments as low as 3.5%.
“Borrowers are increasingly utilizing FHA loans as affordability challenges remain—despite recent improvements” in housing affordability, Joel Kan, MBA’s deputy chief economist, said in a statement.
