I have a 644 middle score, can I get a Mortgage in Alabama

I understand that this is going to be a long post, but I figure the more information I can give you the better the answer will be. I am ready to purchase a home and have been pre-approved through Wells Fargo for the Mortgage. I have been doing a lot of research on this and have mixed feelings about if they will actually be able to close the loan on time. So I have made an offer on a house that I like and it is bank owned. My agent tells me that the offer I made to them will most likely not be accepted and there will be a long negotiating period to be able to get this bank to budge. I plan on closing the loan at the end of November. Since I have mixed feelings about Wells Fargo, I have thought about trying to get approved by another institution. Here are my scores from an actual credit report not a buy them online company. TU 668 Experian 644 Equifax 564. I have negative accounts on my credit report. Wells Fargo says that none of them need to be paid off. I find this very unlikely. The total of the outstanding debt is $6,094. All but one of the collections are due to drop off at the end of 2013. The underwriter asked for a reason for each debt. The reason was that I was arrested and sentenced to 3 years in the state. With that unpaid time off work, I was not able to pay my bills. The underwriter accepted that answer. I should mention that there is 7 open accounts. I do not want to pay them off now since Wells Fargo knows of them and I have been informed that paying off an old debt will actually lower my score. I do have 1 secured credit card that has been open for 6 months with a credit limit of $300 and a $0 balance. I have 4 other credit cards that have been open for 5 months with a $300 credit limit all with a $0.00 balance. When I started this process a year ago my scores were in the low 400's. I have paid off the companies that were willing to negotiate pay for deletes, as well as disputed the information that was over 7 years old. My income in 2010 was $68000, in 2011 was $103,000 and this year I will be around the same. I have $5000 in my savings account, and I have $21,000 in my 401K that I will be using as my down payment. I would like to go with an FHA Loan and I believe that the purchase price of the home will be $265,000. I should also mention that my rent is paid in cash every month so I do not have any trade lines that are over a year old. Does anyone know of a Mortgage company that will do a loan for me with this situation. Should I just wait to the end of 2013 to purchase a home after these other debts are dropped off of my credit report. Should I trust that Wells Fargo will actually be able to close the loan. I just do not want to get into a situation where I lose my Earnest money. Any advice would be much appreciated.