I am assuming you are using your mortgage mid score of 674. That is fine for an FHA loan.
FHA is a great program overall. Your collections won't be an issue at all because they total less than $2k. If your lender has a problem with you having those collections, find another lender.
FHA does require the MIP (mortgage insurance premium) to be paid for the life of the loan if you put down the standard amount of 3.5%
However, if you are able to put down 10% or more at the time of purchase, then the MIP drops off after 11 years. If this is your long term home, it makes sense to put down the larger amount so you don't have to refi and you don't have to pay MIP for the life of the loan. If you need additional funds, see if you can get the seller to contribute toward your closing costs and pre-paid expenses. It would have to be in your contract. The most you can get from the seller is 6% of the purchase price, but you have to get it in writing in the contract for it to be counted by the lender. Your agent can help you with this aspect. it is completely normal for first time homebuyers to need sellers help IME.
YupYup413 is right if you want to go for a conventional loan. You stand a better chance with a higher score and removing the collections and paying down your debt so the credit cards report zero (all zero but one and that one to be a minimal amount).
Note: if you have the credit card report a balance, that is what is used to calculate utilization which is 30% of your score. It is good to pay in full like you do every month, the exception is when you are trying to optimize your score for a purchase (or a mortgage), it is best to pay if off before the statement cuts so the balance reported is zero (except one cc). Go to Understanding FICO Scoring to get a handle on this part.
