Hi CR and thanks for your post.
A long time ago, I was in your situation--buy something small now, or buy something a little better later on. Truth be told and as hind sight is 20/20, I would have jumped into the real estate market a lot sooner and stretched that payment and my finances for the first home. Had I done that, I might be in a slightly larger home today or be sitting with even MORE equity in my current home. But, alas, I waited.
Although the market back in the late 80s and early 90s was vastly different than it is now (and interest rates in MY day were 11 percent on home mortgages--yes, 11 percent), had I purchased that first home when I had the chance, I would have accumulated over $100,000 more money (roughly 1/3 of the home's value) from the first home. Today $100K is not much money, but back when homes were $300,000, a $100K equity increase constituted a rise in the value of 33 percent.
So, my advice, do what I did NOT do, and purchase the home you can afford now, and--much like your work career--make systematic plans to upgrade the home as you progress through life. This is the way to manage your money and your real estate investments. You can always move up from your current home, but it can be tough to move IN to a house if prices continue to rise while income does not meet or exceed the same increase.