Credit Score apx 650; loan approval chances.

[chryanna]

I moved out of the country for work approximately 2 years ago and handled things terribly. My Verizon, Comcast and Macy's bills all went to collections for amounts of less than $200, while I was happily oblivious and assumed everything had been paid. (Left no forwarding address, did not pull credit, etc.) Now I'm back in the US. I've been trying to mitigate the damage to my credit for the last several months and it has improved to about a 650. I think there's a reasonable chance I could get an additional bump to 675 (according to credit simulators) in the next 2-3 months. While I will continue trying to improve my credit in the meantime,  there's little reasonable prospect of improving my scores by much more in a short period. 

I just got a new job in Colorado and would like to buy a home in the Boulder/Denver area. I don't know whether my current score/savings etc, are even enough to qualify. While I'm more confident that the 675 would qualify, I'm not sure what sort of interest rate hit I should anticipate. I would rather move out in about a month and buy a home instead of moving to a rental and then moving again, but obviously I can suffer a little inconvenience if it would make a big difference in my approval/interest rate. Any guidance anyone has would be very much appreciated at this point.

1. Credit.  My credit scores are approximately 650, with Transunion coming in at 675 and Experian/Equifax coming in at about 640. I have a single late payment, two collections from accounts that went delinquent in 2010, and the ruined 120 day late/CO records in my original accounts that go with them. The two collections have not been paid. I understand that before I buy a house, I will have to pay these, but I'm still holding out hope for PFDs. 
2. Income.  Gross income: 180k.  
3. Source of income.  New job that I will be starting at about the same time I look to purchase a home. While the job is new, I have held a similarly-paying job for the previous two years. 
4. Monthly debt payments.  Assorted student loans: Approximately $1000 per month. Car loan: $560. Credit cards: Normally a balance of  few hundred, paid in full at the end of each month.
5. Employment (for those who are employed).  Full time- in the industry since 2010; transferring companies; graduated with professional degree in 2009. 
6. Assets/Reserves.  Savings/checking: Apx. $50k  401k: Apx $35k. 
7. Location.  Ideally Boulder, Co. But housing prices are so much higher there than in neighboring areas. So maybe Broomfield, Louisville/Superior or Denver. 
8. Property.  Ideally a single family home- with two dogs, backyard is a must.
9. Value.  Ideally 300k, but I think I could be comfortable making a 400k purchase (though in each case I realize I am short the traditional 20% down payment)
10. Occupancy.  Primary residence- first home purchase.
11. Transaction Type.  Purchase

[JM-AM]

Your circumstances will vary on the type of loan you are seeking. They will also vary from one lender to another.

1. You would have to bring up your scores for conventional loan most likely. Your late payments, collections will play a part in approval. You would also need a minimum of 5% as down payment plus closing cost and possibly plus reserves of a few months payments.

2. You would be okay to apply for FHA loan as far as scores go. No late payments with-in the previous 12 months, any collections will vary depending on how old they are, the amount owed, etc etc.... FHA does have loan limits depending on the area so that may play a factor also. You will need a minimum of 3.5% down payment, closing cost, and reserves.

In my opinion if no late payments with-in the last 12 months and no recent collections you have a chance for approval. I would go in person, bring a copy of your currently pulled credit report for reference and speak with either an LO or BROKER. In your circumstances I would speak with a Broker who has more avenues for approval. Once you are there have all your questions with you and discuss what all your options are with either the LO and or BROKER. They should be able to guide you in the right direction of which loan would be best for you and your chances of approval. 

One thing for sure is do not apply for the loan until you are 100% back at work on the payroll. If you apply early and they need a VOE for employment (which is normal) the company would have to say you do not work there and you would be turned down immediately. Remember to wait until you are on the payroll first.