How much of your net-worth do you feel comfortable having in your primary residence?

Wife & I are both 33 and we have 3 young kids. We currently have a net-worth of around $1.1M including our home which we own outright (value ~ $600k).

As our family has grown, we are hoping to upgrade our home to our “forever” house in WA state in the next 3-5 years. The houses we are looking at are between 900k and $1.2M. Now we have a pretty decent income of $300k-$400k and save ~50% of our income.

So the decision that I’m trying to make is whether or not we should buy this next house in cash. I’ve gotten really used to not having a mortgage payment, and if we just put all of our non-retirement savings into this next house, we could pretty easily afford to buy it in cash. However, that would likely put ~80% of our net-worth in our home. Which feels weird. The other option would be just putting 700-800k down and getting a $100k-$300k mortgage. But this ofc would make our monthly expenses significantly higher, and the interest rates don’t look very appealing right now.

Are there other factors I should consider?