With your credit score, buying a home is not a wise idea at this time. You will pay much higher rates than someone with a strong credit score. You'd do much better by continuing to rent for a couple of years and getting your credit score up by at least 100 points.
Interest only loans are never a good idea for the neophyte homeowner. They are only appropriate for financially savvy buyers and generally even then only in rapidly appreciating markets. The fact that you even ask the question indicates that you are not sufficiently astute with finances to take that risk.
An ARM might be OK as long as you get a rate lock that lasts at least as long as you intend to live in the home. Locks are available for 5 and 7 years from most lenders. If the ARM's fixed rate is sufficiently lower than a fixed rate loan it might be worth it.
Don't fall for the sucker line that rent is wasted money! It is NOT! You need to pay for shelter and that's exactly what rent does. In some parts of the country mortgage payments are less than rent for a similar property. If that's the case in your area, buying might make sense even with your credit score. If not, put the excess into savings and work on that credit score.
As far as an investment is concerned, housing isn't all that great of a deal. While values have increased substantially in some areas of the country over the past few years, the increase over the long term is much more modest. And if you look back over the past 100 years, most housing has barely kept up with inflation. The increase in the value of my home that I've owned for 7 years has already outstripped what the sellers gained in the prior 20 years!