US returnee,
We wish we had more information about your situation, especially your financial, and plus all other factors..But with my personal experience I am going to write few things assuming that you fall in standard category.
No one knows better than you, your current situtaions.
Do not fall for all those online Mortagage calculators, its not useful; everyone case is differnt.
My personal view; it is quite expensive with your current situations for 400K house and 80K salary and wife not working and expecting a child.
Your Monthly expenses will double once u get the house and add that to when you have a baby, another expenses. And I dont think your wife will soon join the workforce once u guys have baby.

You might just live paycheck to paycheck, and thats a rough situations to be when you dont have chusions. Thats what brought down the housing market when all ppl leaving paycheck to paycheck got the mortagage.
Another Point -
Mortagag, these days are tough So please before you get into looking the house, get some pre-approvals, check your Credit history and do some analysis of your own.

With your second concerened - moving out and getting a less expensive house might seem a better idea from financial point of view, but then what other things should you consider?

For me, I decided to get in "OK" negihborrhood with Medium range ( I guess) but then I choose 15 years becuase I dont want to pay mortagage for the rest of my life.

And yeha most of the ppl are right Rates are going High, especially in last few months and even the house price too, especially the new construction.
Hope this helps; just my 2 cents, spend it wisely !!!