Paying less for a house doesn't make it any bigger, but perhaps you were more comfortable at the lower number because it meant that you could afford to pay for more family activities outside the home to compensate. That is something that only you can know, where and how you want to spend your money as a family.
Another factor to consider is whether or not the house has any potential for expansion. If so, then even if you don't want to do the work now, or can't afford it straight away, it's only a matter of time until you can have your cake and eat it.
You are not bound to this home until you sign a contract and hand over money. Go back to the house for another look...make a decision and then stop second guessing yourself.