Obviously everyone is working with incomplete information but I would say the idea of increasing my rent to get use to the payments is out. If you are renting continue to ave so you ahve more for the Downpayment. As for tapping the 401K, clearly a mistake. Pay the PMI which is now dedeuctible let the 401K ride, consider reducing contribution to the company match, and wait to build some equity on the home. Once you have the equity reappraise and drop the PMI. I have been though SEH. They did a very nice job with the community. Lot more building to take place so supply and demand might keep prices form appreciating.
As all other sposters noted, consider the single family home in areas outside the Mello Roos zone. Clearly you lose the luster of that new community prestige but the 300 a month you save will make it feel worth while. You can think of that additional 300 that you put into the Roth or 401Z as a blessing in the long run.
