I'm not currently a loan originator, but I was in a past life. I would suggest the following.
Pay off the 20% 2nd mortgage first. If you don't want to wait until October because you're concerned that rates may go up again, then do a couple of principal reduction payments on this 2nd mortgage to get it paid off a few months or weeks early.
Concentrate on raising both of your credit scores (yes even further) in the months until you pay off the 2nd mortgage. The best rates in the current environment are reserved for folks with a 740 credit score and above, and the banks score is not always the same as the one that you see for yourself (and the banks scores are often slightly lower). And you may be int he best score position just before your final payment on the 2nd mortgage.
I'd speak with a few potential lenders before you go ahead and select one to work with. I'd suggest pulling your own credit scores first and when you speak with the lenders just tell them your scores and what you'd like to accomplish/pursue with your new purchase loans before having them inquire into your score (and potentially lower it).
I do have a few lenders that I could suggest for you if you're looking for someone to work with. Good luck.
Broker Associate, Sudler Sotheby's International Realty