Hiya,
The short answer is "it depends". We bought a new home this past spring. Thanks to COVID-19, our lender rescinded our approval because it changed its internal standards. So, with one month to the closing date, we had to pivot and switch lenders. Turned out better, actually, we got a lower rate and they were still able to close within 2 days of our targeted date.
Some lenders changed their internal guidelines, others did not. One thing that changed was that the lender conducted additional employment verifications over what they used to do pre-covid. They actually checked 3-4 times for us. Apparently, since COVID messed with some people's jobs, there were a lot of people who were approved, only to lose their job to the pandemic.
My best advice would be to sit with your agent/broker/lender, whatever title they use, and ask them to help you determine how far off you currently are from what would be needed. We knew we wanted to do, but when we actually sought preapproval, we were actually just trying to see how far away from qualifying we were, so that we had a game plan of what work we needed to do. Turns out, we got two preapprovals right out the gate. We didn't end up going with either of those lenders, but it showed us that we were better prepared than we thought we were. Now, we have our dream home, and at 3% fixed, we're actually spending about $60 less per month on P&I than we were on renting.
As for collections and charge-offs, I would not think that they only focus on the last 12 months. They will want to make sure that you don't have anything hanging around that's large enough to mess with your ability to pay a mortgage payment now. Example, suppose you had a $10,000 collection from three years ago that's still unpaid.....if that creditor sued you in 6 months from now, and garnished your wages, it could make a mortgage payment unaffordable. That's the kind of thing they won't allow. So it depends on your specific credit--how many negative accounts, what is still unpaid, and so on. Best bet, if you have collections and charge-offs on your credit, best general rule is to work to clear those up before you apply. Even if you could show you were on a payment arrangement and were paying for some months as agreed, that might be enough for some underwriters to still approve you. Again, though, it depends on your specific situation--how much you make, how much you owe in collections, etc.
