NoSoup

Alrighty Denim-

If I were in your shoes, I would probably move into a cheaper apartment, and forgo the house at this point.

A condominium may be an option, but historically, they are the slowest to increase in value and fastest to decrease. They are generally difficult to turn around for a profit, and usually a pain to find a buyer for.

If you do move into a cheaper apartment save the additional money for a downpayment of a house. 1/3 of your income on just your mortgage, taxes, insurance, and PMI is a little high. The higher the downpayment, the lower your overall payment will be.

However, some people that are very good with their money have no problems with 1/3 of their income being tied up in their housing.

Here is what I would suggest:

Move into the cheaper apartment, and begin to "practice" your mortgage payments. Simply take the amount your mortgage would have been (ie $1200) and pay your rent from it, putting the rest in an account for the downpayment of a home. If you really want to try and experience what home-ownership would be like, if your rent includes utilities, take the average of your utility bills, multiply them by 1.5 or 2 (depending on the size of your apartment) and put that into the "down payment account" as well. You can also "practice" the repairs of the home, which average 2.1% of the home's value per year. for a 150k home, that comes out to $3150 a year, or an extra $262.50 a month. Granted, this figure will vary depending on the shape of your home when you purchase it, but it should give you some idea.

If you find this "practice" to be comfortable to you, I would then go ahead and make your home purchase. If not, after a while you should have a substantial downpayment to purchase a home similar to the one you are "practicing" on, and yet have a much lower payment.

As far as using IRA funds to purchase a home, I wouldn't, although some situations may warrant it. From my understanding, there are certain exemptions when you utilize those funds without being the required age, and a first time home purchase generally does qualify.

Finally, on 80/10/10 mortgages, I don't really see any reason not to do them, unless the 3rd mortgage rate is very high. Personally, I would check around to find an institution that offers 2nd Mortgages up to 100% and doesn't require PMI to compare rates. Also, be very wary of closing costs and prepayment penalties.

If at any time you (or anyone else reading this) are looking into a loan and feel uncertain about the terms or just want to make sure that you aren't being cheated, I'd be more than happy to take a look at the documents. Simply send me a PM, and I can give you a fax number, you can delete all the personal information (last name, social security number, address, ect.) and you can either fax it or scan/email it to me. I must warn you, however, that I do live/work in Wisconsin, and I may not be aware of some of the laws that exist in your state.

Also, if you are wondering if a certain combination (80/10/10, 80/20, ect) will save you more money, just send me a PM with the interest rates/terms of the loan and I'll work it up and let you know what the better deal is.

If you need anything else, just let me know!