All of those are good options, I wonder why, with a paid for house, you only had a few hundred to put in the bank when you were bringing home 3K a month?
I assume the biz income will be in addition to your salary.
E fund sounds like an appropriate amount. No need for the extra 1200/year. Put that in a Roth or add to your 401k percentages.
Decrease your payroll withholding so you don't get a refund, now that you are mustachian you can put that money to work.
I'd say use the 35 or 40% down options, give your business a bit extra, most things in live cost more and take longer, or use it to max not just the match but increase the overall amount into 401k savings. Or Roth.
I also wouldn't say get a cheaper house. As long as you aren't buying the most expensive one on the block, and other fundementals look good, it's within a reasonable budget.