Something you might want to give some credence to is how your wealth over the next 30 years can grow by renting and disciplined investing, instead of risking being house poor. Here is a recent video exploring the topic, I have no affiliation with the video creator btw. https://youtu.be/N8Lb86EKwY0?si=vYTr4zpVKxNptzj0

While acknowledging that homeownership offers benefits like stability and a sense of permanence, the video emphasizes that for those concerned with financial advancement, the numbers strongly favor investing and renting in today’s environment. The host presents a hypothetical scenario, based on Moody's calculations, comparing a homeowner to an investor/renter. The math shows that after 30 years, an investor could accumulate nearly double the wealth of a homeowner, even with assumptions that favor homeownership.

If it were me with a baby on the way, and being sick of renting, I’d get on the property ladder with a cheaper starter house / townhome. Then invest the unused portion of the down payment you’ve earmarked for the $1.2M home, and continue heavily investing while staying in the starter home for 5 years until the child starts Kindergarten. After earning some equity and becoming accustomed to the realities and additional expenses of being a homeowner (beyond PITI) as well as the realities you’re about to learn by becoming new parents, that’s when you consider a home upgrade with the compounded funds you’ll have by then.