Hi all -

We are a soon to be married couple looking for our first house.
Though we make decent money, its still hard to find anything we'd want
to live in as we're looking in an expensive area, Fairfield county,
CT.

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.

The plusses of the house are that it is the absolute BEST VALUE we've
seen in this price range, and we've been looking for several months.
It is also the type of place that with a little sweat equity, we could
really raise the value of the house (which isn't true with most
starter-ranch homes).

I have two questions:
1) Are we jumping into financial suicide?, and
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?

Thanks!!!

Dave