Looking to apply for a mortgage this year. I had intended on applying after my chapter 7 falls off in a few more months but I have heard conflicting reports about whether or not my score would even go up after deletion. While I have rebuilt some credit I have 5 collection accounts(3 Midland) that I settled within the past year. All that is left on report from a balance standpoint is student loans that are being paid as agreed. So my DTI is one of the few things working in my favor. I have a few low limit cc's that I applied for in the past year and keep less than 15% on those.
I am hesitant to apply for anymore so i dont have too many inquiries. My question is should I wait until the bk falls off completely before applying and is there anything else I can do in the meantime to raise my score? My fico is currently 668 and I'm hesitant to do anything else that could potentially lower my score. I would appreciate some insight since I am unsure what to do from here.
Starting Score: 620
Cards: Orchard Bank ($1100) | Cap1 Cash Rewards ($2500) | Chase Freedom ($1000) | Best Buy ($2500) | Discover It ($1000) | Barclay Rewards ($2500) | Current scores: EX FAKO: 684, CK TU: 649, FICO EQ: 680, FICO TU: 698, FICO EX: 658 Happy Homeowner Since 2/6/13! 
Last App: 4/5/13 Gardening until July 2014
After BK, you are supposed to be a model citizen as best as you possibility can. Unless you have a great letter of explanation that you can write to the UW stating that those collections were out of your control, I don't think your file will go over well with a BK, borderline credit score, and 5 collections in the past 2 years. I would wait until the BK falls off and try then as someone who never filed. There is a chance, they will look it up in public records...just be aware of that. But in your case, you have a much better chance getting approved after the BK is removed.
I should add that 4 of the accounts of those collections are 5-6 years old and one that is 2 years old. Again, all of those paid to zero balance. I realize that no collection or late payment etc. is ever looked upon as favorable in the eyes of a lender. I also realize that waiting until everything falls off the report, keeping revolving to a minimum, and establishing new credit over time is the best possible choice as far as getting a favorable mortgage. I do know that people get approval for scores that are less than mine. I guess for now I can give it a try and see what kind of rate they'd be willing to extend - yes, I could get dinged for an inquiry but if I end up waiting anyways it won't really matter.
I have noticed interest rates on the rise of late and expect they will continue to do so. It is quite possible I could wait a few years then home prices recover, rates go up, my score goes up but still it really wasn't worth the wait. I've rented for nearly 15 years now and I just look back at all the money wasted. Even a bad home loan(high interest) is better than renting IMO. Even if I am paying tons in interest, some of the money is still going toward something. There is also a chance I could restructure the loan at a later point in time once my credit has fully recovered.
Lenders also like to see multiple positive trade lines after BK to evaluate how much that person has learned about managing credit post BK. No positive trade lines post BK can be equally as bad as having multiple collections post BK. How many positive trade lines do you have and how old are they?
The paid collections (especially) the most recent one I would try to GW.
You can most certainly fill out the application and give it a try, just don't be surprised if it comes back denied. It isn't all about a qualifying credit score. Lenders look at many other things to determine if someone is a good candidate for a mortgage or not. If your scores were in the 700's, you would have more leverage with the lender. You may get approved with conditions that aren't easy to satisfy. Like the lender may require 3 months of reserves and several collections removed from your reports like we are telling you to do before hand. Having a conditional approval with conditions that cannot be satisfied before the preapproval expires, is basically a denial as you would have to reapply after you satisfied the condition. Preapprovals are only good for 90-120 days and it is likely to come back with conditions that cannot be satisfied before the preapproval expires. If you wait for the BK to fall off, your conditions will be easier to satisfy. To me, an approval with conditions that are impossible to satisfy before your preapproval expires, is a denial dressed up in nice clothes.
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