The approximate interest rate for a down payment loan in the United States typically ranges between 6.5% and 8.5% as of late 2023. This range accounts for variations based on loan type, creditworthiness, and market conditions.

The interest rate for down payment loans reflects the risk associated with partial equity contributions. Lenders charge higher rates to offset the increased default risk when borrowers invest less than 20% upfront. For example, a 2023 Federal Housing Finance Agency (FHFA) report noted that conforming loans (with 20% down) averaged 7.0% for 30-year terms, while non-conforming loans (with less than 20% down) exceeded 8.0%. Private mortgage insurance (PMI) costs, which range from 0.5% to 1.5% of the loan amount annually, further increase the effective borrowing cost. Additionally, the Federal Reserve’s 2022–2023 rate hikes pushed average mortgage rates up by 2–3 percentage points compared to pre-pandemic levels. A 2023 Urban Institute study found that borrowers with down payments below 10% faced interest rates 1.2–1.5% higher than those with 20% down, reinforcing the risk premium. These factors collectively justify the 6.5–8.5% range for down payment loans in the current market.