Using the calculator catccc pointed out, I came up with a rough estimate for anyone who's curious. I'm not completely confident in these numbers, but it's a good place to start. It looks like, if you agree with MMM's ER strategy, (around 600k stache, between 20k and 30k annual expenses)$10,000 amounts to 3 month's extra work before retirement if you're saving at a rate of $25,000/yr. Based on that, 1 year's work can buy you $40,000 more worth of house. That's if you pay the 40,000 up front, though. Paying it through a loan is, in the current market, a better situation, because the interest rates on the loan can be beaten by a savvy investor. With a higher rate on the loan, though, or weaker investments, the real life picture could be a bit worse, not better. Also, this model does not account for the probable increase in taxes and maintenance that comes with a bigger house.
In my case, it's probably a bit worse than that, because we'll likely up our annual spending by having more kids in the picture. Still, I think I can deal with a year or two of extra work for that much of an increase in home-buying power. With the bargain housing in my area, $40,000 is worth a heck of a lot.
Still, I'll keep FG's advice in mind. A bit of DIY can go a long way, financially, and I'm probably being a bit of a wimp in looking at pricier houses just to avoid it. Thanks to FG and RootofGood for pointing out that maintenance and taxes will be a significant issue in any house. It sounds like I'm going to need to learn the Home care DIY skills in a new or old house, anyway, so maybe I shouldn't be avoiding the repairs so much. RoG, I completely agree with you about the frugality of the neighborhood. That's a very good point. Also, I'd like to stress for any future readers that my estimate above does NOT account for tax/maintenance increases.