Once you have equity equal to 20% of the purchase price, you should be able to get your PMI cancelled immediately. As you investigate mortgage options, discuss with the loan officer how much various payment scenarios would cost you. Get it in writing, take your time, make sure all is clear to you.
Ideally you want a product that allows you to make extra equity payments without extra fees. Sometimes the lender will charge you if they set extra payments up for you, but often you can do it yourself for free, just by mailing extra checks. Then you could back off on the retirement savings rate and put that money toward getting rid of the pesky private mortgage insurance.
I am 100% against borrowing from your retirement funds for this purchase. The tax hit and penalties are too high, and that money is your nest egg in the event of a personal catastrophe. Most likely it will just sit there until you retire, and that's good enough too.
Interest rates will remain stable for another year at least, because the Federal Reserve Board has declared they will make it so. After that, many observers believe interest rates will head up owing to inflationary pressures. One thing everyone I know agrees on--interest rates can hardly go lower than they are now.
No one has a crystal ball, it's true, but in my most humble personal opinion :) , prices in Boerum Hill and environs are headed up, or at least flat, not down, barring some catastrophe. I believe there is pent-up housing demand out there, and foreclosure purchases are just not for everyone.
I like what you said about your 401K because this suggests you have assets you could access in a dire emergency--say a major medical expense. This is also a good time to review your life insurance, and especially your disability insurance, and when you obtain homeowner's insurance, make sure you insure sufficiently to cover your loss of a place to live in the event of a major hazard loss to the building.
The upside of a low equity position in a piece of real estate is that if you had to walk away, your losses are minimized. That's not necessarily a bad thing. As I love to say: Real estate is an investment whether you like it or not.
All that said, if you're pretty sure you're going to stay put for at least 5-10 years, or that you could rent the place if you must suddenly move to Timbuktu, then if I were you, based on what you've said here, I'd definitely buy the place.
However--since love is blind--it's especially important to hire a licensed home inspector to point out the repairs that are needed so you know what you're getting into. Best of luck!
Lic Real Estate Salesperson