I can see where you are coming from, it is frustrating when you feel you have the income to support buying but your credit score holds you back. Unfortunately being patient is sometimes the hardest part about fixing your credit! It will take some time to fix but it's not impossible. I raised my credit from mid 500's to mid 600's in about 8 months. I actually learned a lot about being financially responsible during that time, and I think it makes me a better homeowner now.
You will need to address all those collections. Dispute what you can. After the disputes are resolved, offer PFD. If nothing else, pay them. If you PIF, dispute it afterward. I paid a few collections around $100 or so each in full then later disputed and they were removed - I'm guessing they didnt' want to bother dealing with verification since they already had their money.
I am guessing you won't be approved regardless of your score until the repos are at least 1-2 years old.
You don't need to open any new credit cards, 3 should be plenty, but work on raising the limits of the unsecured card that you have. Request CLI as often as you can without a hard pull. If you get rejected, call the recon number and explain that you always keep your balance low or even better PIF every month and see what they say.
Our lender was used to working with less than perfect credit. He was okay with a few old collections, even told us not to bother clearing up our medical collections, but wanted a max of 2 left on our report before closing. With lower scores, he did say we would need 1 full year of no lates across the board, 1 full year of no new collections, and 1 full year of rental history payment, which actually took us LONGER to get than decent scores. Once we had that, he approved us almost immediately at 3.5% interest. we had gotten our mid score to around 640 but he wasnt' concerned and said he could have approved at 600 once we'd met the other conditions.
I think your best bet will be FHA loan, they are more credit lenient, so look into their guidelines. It's doable with 580 but it will be a hard battle. You'll need at least 3.5% down, maybe up to 10%.
Finally, don't get desperate and go with sub-prime lenders. We almost did. We wanted a house so badly and thought we could afford an 11% interest rate. We could have made the monthly payments, but we would not have been nearly as financially stable as we are now. Even if you can afford it, try and think of how much nicer it will be for future you if you can manage to wait it out a bit right now! Life used to be daily financial stress for us, we got so used to it we didn't know any better, and thought we'd always worry about money, that it was normal. I'm so glad we didn't get a sub prime loan! We dragged ourselves out of a bad situation and now we're building a decent savings every month, and equity in a house we love that we worked hard for a year to get. Worth it!
