Pay Higher Interest Rates: Bankruptcies allow persons with excessive debts to start anew. Unfortunately, a bankruptcy discharge causes credit scores to plummet. If applying for a mortgage, a low credit score will justify the lender charging a higher interest rate. Borrowers can pay as much as three or four points above the current average, which will greatly increase mortgage payments.

Limited Loan Programs - If you have a recent bankruptcy, you can forget about getting approved with a prime lender. There are two types of mortgage lenders: prime and sub prime. Homeowners with good credit and those who meet the ideal lending requirements can apply with prime lenders, and receive a good finance package. On the other hand, if working with bad credit, bankruptcy, or excessive debts, a sub prime lender will offer better odds of a loan approval. Unfortunately, some sub prime lenders are choosey. For example, certain sub prime mortgage lenders will not offer loans to persons with scores below 600. Others may have higher caps, in which acquiring a loan with a score below 620 is difficult. For this matter, persons with a recent discharge should be prepared to research different lenders.

Down Payment Required: Even though a multitude of home loans offer 100% financing or more, persons with a recent bankruptcy may not qualify for these loans. On average, lenders require a decent FICO score before approving such loans. Homebuyers who have not rebuilt their credit may need the traditional 20% down payment. If the cash for a down payment is unavailable, now may not be the time to apply for a home loan.