I don't fault you for wanting more space at all. I'm a space person, and so is my son. We have a large-ish house but use every room in it.
Since that house is already gone...
You know what the mortgage would be, so I would try to live with that for the next year to try it out (put that money away as untouchable, since it's "your new mortgage" and you can't just not pay part of it every month).
Now, every time an appliance breaks, put more money aside as if you had to replace it yourself (hopefully nothing breaks, but you can pretend! Set aside the money every month for at least one appliance failure a year, and hopefully, as a homeowner, your rate won't be anywhere close to that.)
What utilities are included with your rent? Garbage? Water/sewer?... Find out what the average household uses and set that aside as well (then aim to be a less-than-average user once you finally buy your own place).
Electricity will likely cost more in a larger place (however, that's not always the case, since a newer place may have a more efficient heating/cooling system and better insulation). Double your electric bill and put that money aside.
Now think about those things that have to be done for maintenance. Eventual new roof, painting, plumbing repairs, furnace parts, landscaping (cost of a mower, weedeater, gas, etc). Set aside some money for that every month.
After a year (or a few months if it's a bad experience), you could have a better idea if this is something you want to be tied to as a monthly obligation, or if it is worth it to save a little longer for a larger down payment and better sale price. Is the chance high that real estate is going to go up too high and you'll get priced out? Or does it seem to be pretty steady?
I'm single (with one kid) and have about the same income, depending on how much overtime I work. My mortgage is right at $1k/month. My only other debt is some property where I will eventually build a house. Just the mortgage is no problem. The property payment puts me pretty much where your mortgage will be. I can say that I still save for my son's college, I still travel (although not as frequent as I want yet), and I still save for retirement, and still save up for all the repairs, etc. However, if I lost my job, I'd likely have to give up the property. If those two payments were all one mortgage, rather than a mortgage and separate property, I'd probably lose my home.
You also said your wife walks/bikes to work. What will her options be if you "move to the other side of the mountain"? Will you need another car? Do you have the money already saved for that?
When I bought my first house in '97, I believe the recommendation was that mortgage be no more than 29% of gross income. I'm much more comfortable with something closer to 10-15% (and that's what my mortgage+insurance+taxes is, it's the property that sets it higher). I also have a secure job that I don't see going away anytime soon, and raises have been small, but have been received almost yearly. However, job loss can also happen through injury, etc.
If you made it through all that... I think the mortgage is doable, especially if you don't have kids/plan on having kids (so no having to save for college, daycare, etc). However, if you can "practice" for a year, you'll be much better prepared for the actual costs, and have another year's worth of savings for a down payment, while hopefully figuring out if you'd really be comfortable with the payments.