Got my hopes up, then shot down for USDA Guaranteed. What's the next steps?

[thankfulheart]

Trying to decide if patience is my best friend in this situation as the LO told me today my score was too low.  Basically a single mom trying to rebuild my life for my kids and myself. All of the credit negatives are 2007- early 2008 before I was working and when my children's father (CF) decided he didn't need to work year-round and thought the bills would wait. 

1. Credit: TU -  593, EQU - 568, EXP - 619.  TU is the most thorough of the reports, showing all 9 medical collections and 3 public records.  The med stuff is b/c they refused to take small payments and sent me over, so I refused to continue to pay.  As long as it's screwing up my credit, anyway, why bother.  3 are due to fall off next year, the others I might try a PFD approach.  The PR, 1 is due to fall off in 2012, 1 is an IRS lien that is PIF (although to my surprise, not reporting that way currently) and  I'm sure I can get that entry withdrawn under the new laws.  the 3rd is a state lien that is PIF and reports correctly.  There are a few lates in the last 12 months on my CF's home, but I can't get my name off of that.  It's under $9K owing, so hoping to get that paid off in 2012.  Utilization is 28%.
2. Income.  Income is $50,600
3. Source of income.  Salary, plus $700/mo "child support"/"buyout" on the other house
4. Monthly debt payments.  $450 car payment, 36 months still left (non-negotiable, not selling/trading, yes I'm stubborn on this one), $85 in student loans, CCs paid off monthly.  There is residual CC debt from the marriage which will pay off in 6 months or so.
5. Employment: Fulltime, salaried, in my field which I finished grad school a year ago for.  Stable and moving up
6. Assets/Reserves.  $3K in 401K, $1,000 in savings
7. Location.  FL
8. Property.  Single family, new construction, qualifies for USDA
9. Value.  $140,000
10. Occupancy.  Primary residence
11. Transaction Type.  Purchase

One other qualifying factor is that I have been paying $1200/mo rent for the last 2 years, so can prove that the payment is within my reach.

[Anonymous]

I got a USDA guarantee loan and had to get my middle score higher then 640.  I wouldn't worry as much about the medical collections, although you could try for PFD's with them.  I had a few collections and was not required to pay them off, however they all only totaled $1000 so that probably helped.  I think the lien and lates are what will hurt you they most - we could only have one late payemnt in the past 12 months but thankfully had none.

[mocha82]

Have your considered FHA?

[Booner72]

Your scores need to be up to at least 620 and that is pushing things - 640 for sure can get you in the door.  (Meaning, you can't get to an underwriter unless your scores are high enough...then once that happens, the UW decides what else, if anything, needs to be corrected such as   the unpaid outstanding collections.

I think patience is your best friend.  Definitely do PFD's if you can for those collections.  Your score will improve from getting rid of those, and your credit reports will be much cleaner. 

Good Luck.