We are in a very similar situation. My DH works at UCSD as well and I am also in biotech.
We actually talked with HLS recently and he strongly recommended to do whatever we can to escape that pesky PMI – and indeed borrowing from 401Ks is what he suggested. He doesn’t think 401Ks are such a good investment, so it’s better to have those money working for you by avoiding PMI. Now, the risk is there, but, if you keep some cash reserve just for that (repayment if you leave the job) you should be ok in most cases IMHO. You need to put at least 5% cash down, HLS said.
Unlike you, we bought unwisely a house during the bubble and (almost) got burned before unloading it. Not just a figure of speech. But we literally sold our place in RB a month before the fires went through the neighborhood in Fall 2007. Once burned, twice shy, you know what I mean? For a couple years now we’ve been looking and looking and trying to optimize different parameters. We went all over the map with our searches. We’ve settled on PUSD as well, though our criteria are slightly less than yours, so hopefully we won’t compete 🙂
Back to the OP – IF you put only 10% down, then I’d keep 5% cash and borrow the rest from 401k.
But if you can avoid PMI by borrowing from both your 403b and 401k. AND keep enough CASH reserve to cover the principal of ONE of the two 401k loans (the riskiest – yours, I presume, since your wife’s job is more stable) then I think THAT would be the optimal solution, that also minimizes the risks. If you are looking for 550K house, then you may have to wait and save for afew months up to 1 yr. Even better if you can keep the financing under 417K, like UCGal suggested. I don’t think the rates will start picking up that fast that soon, but that’s just my guess (hope???).
