patrick.net

A good starting point is what you can get with a loan say 417K and 625K since that level provide the best value. A 30 year $625K conforming jumbo loan is about 3.75% or 2,900 mortgage.

Principle = 900
Interest = 2,000
Property Tax = 800
Insurance & Main = 300 (100 insurance and 200 reserve for maintenance)
Tax Benefit = (900)
(sweet spot of the MID)
Cash outflow = 3,100
Expense net of principle payback = 2,200.

You can easily afford a 700K-800K home, put 180K down and get a loan for 620K. For a 3/2 SFH, that can be tier 2 cupertino, Cambrian, Sunnyvale. These homes rent for about 2,500 - 3,000. Take home pay is around 8,000 even if you max out your 401K (30K a year) which you should continue to do and leave a reserve of 120K. You can accelerate your payment and pay off the loan in 22 year or around mid 50's.

If you are not comfortable with that, you can go Milpitas, Tier II San Jose for closer to 400-600K so it is easily affordable. But for a family of four with young kids, the places above will be far better for your family and will retain better value long term.

At 35, there is still a lot of room to make a lot more money. I don't live in Santa Clara County so I can't help with specifics. I don't know what "good" school district means to you. I heard that Cambrian is a good choice for a family like yourself. You cannot compete in Los Gatos, Cupertino Tier I and Palo Alto.