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[quote=Anonymous][quote=Anonymous]OP here again. Thanks for the comments received thus far.

A few points:
Part of our frustration is that while we live centrally, I work downtown and my wife works in Fairfax. So we can't really move further east withouprettt worsening her commute (which is already terrible on 66). Of course, going west really doesn't help the affordability problem at all. Otherwise, we'd be able to consider Brookland, H St., Takoma, or PG.

Additionally, another frustration has been our lack of being able to save due to childcare costs, etc. We have decent savings, retirement, and are beginning to save for college costs.

Saving for a down payment on top of that in this environment is intimidating and would take years. In fact, you could argue that houses are appreciating faster than we can save. What's the point of saving, say, $15,000 per year when house values rise $40,000 per year? It's clear that you've missed the boat and that 'path' is no longer viable. Further, I'm not comfortable putting only 3.5% down. I'll be paying PMI forever and I hate paying interest on anything as it is. It's just more money down the drain.[/quote]

OP, we had some savings, but we didn't want to deplete it for a downpayment.  So we did a conventional loan with 5 percent down.  The PMI on conventional loans (if you have good credit) is not bad at all.  It is much higher on an FHA loan.

You have to take the long view with a mortgage (given you aren't planning on moving in 2 years).  With interest rates as low as they are, it might make sense to buy now and pay $120 a month in PMI as opposed to waiting 5 years when rates might be a couple percentage points higher.  But it all depends on finding a house in your budget.  In my case, it actually is cheaper to buy than rent the same house.

It helps to call a mortgage broker and as them to tell you all of your options regarding low downpayment and different PMI arrangements.  If you have good credit, there are more options available.  A lot of people assume FHA is the only way to go, but if you have good credit a 5 percent down conventional loan might work out better.  The PMI is usually about half what it is for an FHA.  Remember, FHA loans were in part designed for people with not as stellar credit.

If I were you, I would call a mortgage broker (First Home Mortgage is the one I used, but there are others) and lay out the options.  They will be able to give you some approx. breakdowns of what loan amount gives you what payment and PMI on a 5 down conventional.  they'll also be able to tell you other PMI options (like paying the PMI upfront).  Knowing the monthly payment will really give you a better idea of what your max purchase price is (leave some room for variation in property taxes).  And then with that information, search out where there are houses in that price range.

And then go to those areas.  Don't just judge by what you read on here or what other people (who haven't lived in those places say).  Check them out.  Go to crime spot/stat maps to really see a breakdown of crime in those areas.  You might be surprised and find some workable options.

Another important question is how likely are you to stay in your current job for the next 5 - 10 years?  and your wife?  Because in DC, changing from a job in one section of the city to another section can drastically alter your commute.  If you both aren't sure about staying at your current jobs very long, then I would hesitate to buy a house.

Best of luck.
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