In answer to your questions about interest rates and prices in 3 years, obviously nobody here can answer that. If pricing continued to drop at 10%/year the current benchmark of $425k could wind up around $310k.
However, I think most people here would probably agree that if that happens the 100% financing programs will probably not be available because of the losses suffered by the lenders and secondary market investors. Interest rates probably will be higher. A 7% loan on $310k is about $30/month less than a 6% loan on $350k.
The upsides of buying at the lower price are twofold; you’re that much closer to paying the loan down, and there is the option of refinancing at the lower rate if/when interest rates come down again.
At any rate, this entire discussion might be academic. I question how sincere your landlord is about actually selling at the $350k.