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[quote=Anonymous][quote=Anonymous][quote]We came at $375k a few ways:
1. Many calculators recommend putting 20% down. $75k is the upper end that we'd be able to muster in a best-case scenario while factoring in closing costs. Also, we don't want to drain our emergency fund to come up with additional money and we may have another kid soon, in which case we'll need additional savings. Based on previous comments, I may consider putting less down and paying PMI but that will be a bitter pill that I'd rather not take if I can help it.
2. Many calculators recommend not going above 2.5x annual income. That may be conservative but it's what we're comfortable with.  
3. Many calculators talk about 28-36% gross income for mortgage payment, but this seems really high, particularly since we'd only probably be able to afford a fixer upper (which will require additional money along the way). Right now our rent is much less than that and we'd like a mortgage that's close to our current rent. That way our cost of living will be predictable. And that's in addition to existing childcare costs, college savings, and retirement savings (let alone groceries, etc.)! Paying 28-36% toward a mortgage payment would substantially change our household expenditures picture.

All of these factors steer us in the vicinity of $375k. Evidently most folks are willing to stretch themselves further than this (hence the high prices). I can't think of any other way.[/quote]

OP, if you purchase a house for $375,000 with 20% down, you'll have a mortgage of assuming a mortgage of $300,000.  Assuming taxes of $3000/year and an interest rate of 4.5%, your monthly PITI will be roughly [b]$1820.  (I imagine that's considerable less than your rent right now)[/b].  That's $21,840 per year, or 14.5% of your gross.  I understand you don't want to get up in the 28-36% range, but you're a long way from there at $375,000.  And nased on what you've said you want, $375,000 just isn't realistic.  [/quote]

Especially when you factor in the tax deduction you get for mortgage interest, especially in the early years. You're effectively getting 1/3 of your mortgage payment back in tax deduction, so your net income becomes higher. [/quote]

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