For me, the mortgage question falls into whether it makes sense to pay closing costs. If you can get the seller to pay for them, that would be ideal. Otherwise, is it worth shelling out X thousand dollars to get a temporary mortgage? I would definitely continue putting money towards retirement but would consider a reduction in college investing for the short-term to save up for the home purchase.
One thing is for sure, if you don't ask you'll won't get it. But, I don't think the market is in a place for buyers to be asking for things like this. I guess with "starter" homes it is common to ask for a couple thousand in closing, but if I was to sell my house and the buyer asked for closing costs, I would look at them like they were a weak buyer. The last home we sold (in 2011), we got multiple offers. One party bowed out, one party's initial offer they were trying to dicker with us on a house that was already priced a little below market (plus asked for things like closing costs, fridge etc), but came up to our asking price and the other was just at asking price, but they never dickered with us. Guess who got the house?
"If you only have 1 year to live, move to Penn...as it will seem like an eternity."
Good to see you back, I was starting to miss your incisive commentary!