In article om,
wrote:

We think we've found our "perfect home" selling for about $400,000
(about $50,000 more than we can 'comfortably' spend/most banks would
want to loan us). The mortgage payment would be $2500/mo (we don't
have perfect credit), PMI would be another $93/mo (we don't have any
equity) and real estate taxes another $500/mo (ouch). This would
bring our total payment to $3100/mo. Factor that in with the fact
that we pull in a combined $5500/mo after taxes and we have a
situation where we will be undoubtedly strapped for cash. We
understand we would be living "poor" for a while but we are optimistic
that our salaries will increase nominally over the next few years.

1) Are we jumping into financial suicide?, and

Yes. $400K is too much for a starter home. You either need to
rent until you can put 20% down (renting is a great deal right
now in most places), or rent a u-haul and move somewhere cheaper
to live. You could probably pick up that same house brand new
with all the upgrades near Bentonville, Arkansas, for just over
$100K due to the new construction housing bubble having burst
very badly in north-western Arkansas. That would give you a
payment of $600 a month or so, and some of the lowest taxes
in the nation overall.

2) How will tax benefits work? Assuming $2000/month of our mortgage
payment will go to insurance and another $500 to taxes, does that mean
we would have a VERY LARGE tax return to the tune of $600+/mo? How
heavily should we factor this into our overall financial picture?

Never make a deal based on tax considerations. Congress could
change the law at anytime, leaving your decision meaningless.
If you do get a bit of money back on your taxes, so much the
better, but don't bet the farm on it.

-john-

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John A. Weeks III 952-432-2708
Newave Communications http://www.johnweeks.com
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