Possible move to South Bay area, CA?

[Alison]

It would help a lot to know your budget. Houses can be very expensive in certain "pockets" around the bay area, but are expensive in general.
For starts, Half Moon Bay looks terrific in the Chamber of Commerce pictures but when you get there it has a pretty run-down feel, very little of the area is "kid friendly" and it's really wicked foggy and cold most of the year.The commute could be literally killer, it's dangerous.
So, back to your other options. I can recommend my neighborhood for starts. I live in the Willow Glen area of San Jose. You might have to downsize a bit unless you have $1M or more to spend on some of the larger houses (smaller ones cost less) but it's a lovely vintage neighborhood that is VERY kid friendly. Also, the Rosegarden neighborhood is another pretty vintage neighborhood. It's safe but it's more older folks that live there.
If you're willing to get away from vintage neighborhoods the Cambrian area has good schools and is darned quiet (that's where I grew up.)
I'm not a big fan of Cupertino or Mountain View for vintage neighborhoods. Cupertino has become a magnate for Asian communities (nothing wrong with that but if you're not Asian it can feel weird.) Mountain View is kind of odd. Parts of it are inexplicably very expensive (nothing special, just pricey) and parts are just very blah. I suppose there's no slouch living there but I love old, walkable neighborhoods and it just doesn't do anything for me.
Campbell is quite the hot ticket right now, but even though it's got a lot of vintage homes and a VERY vibrant main drag it's mostly popular with the young bar-hopper types. It's also got a pretty high crime rate that goes way back (I've never understood why but you can't argue with statistics.) It's not really dangerous, you're just really likely to have your kids' bicycles stolen and maybe your laptop. It's also kind of over priced for what you get. If you're not extreme social butterflies I'd say it's not worth the money.
If you've really got money $2-3M to spend Los Gatos is amazing (super snobby but you can't do better around here, unless you get into Los Altos or something.) The schools are terrific and it's picture perfect. (Ever heard of Thomas Kinkade? That was where he lived, and that's what the best parts of the place look like.)
Whatever you do, do not buy anything on the East side of San Jose, even up in the hills. Also, stay away from Oakland. If you consider buying up in the Santa Cruz Mountains get a very good real estate agent. There are lots of weird neighborhoods up there and many houses built without permits. You will need a person well versed in that area to keep you from getting ripped off. Some neighborhoods are just fine and then...well you get the idea.

So if $3,500 is what you can afford for mortgage only you're golden. The interest rates are so low right now you should be able to get into most neighborhoods easily.
The thing is we don't emulate the European model of city planning where you can just walk to the church, the grocery, the park, the stores. We're way spread out here and unless you deliberately choose a house based on it's proximity to those things there are no entire neighborhoods/communities that will automatically give you that. We're only just starting to work on that but nothing is really built yet, just planned. I'm afraid no matter where you go, unless you coincidentally hit it lucky you will need to strap junior into the car for at least one regular need. Honestly the grocery stores and parks are almost never close to each other. Just a quirk I guess. In my Willow Glen neighborhood you can find what we call "pocket parks" within pretty easy walking distance and corner markets if you just need milk within a stroll. Really, you will need to secure a local real estate agent that can scope out the various neighborhoods for you to suggest homes that are close to the most important features to you.