Choosing to be house poor...Does it ever make sense?

I'm in my late 20s, and have been wanting to buy a house for a while now.

I make about $50,000 a year. It's a very reliable job with a low risk of being laid off, but there's also very little room for salary growth, beyond yearly inflation adjustments. I have a pension through my work, and I've also put away about $15,000 into investment accounts and a Roth IRA. I'm not looking to retire early or become wealthy, and my main financial goals are just enjoying my life and having a bit of security.

Houses here start at $200,000 for a fixer upper. I've saved up $65,000 for a down-payment, so I have enough to put down 20% and still have an emergency fund left over.

I found a house I like that's close to $200,000. My problem is that even with a 20% down-payment and a good credit score, my monthly mortgage payment works out to be 41% of my take-home pay. While that includes home insurance and property taxes, it doesn't include utilities (est. 8% of my take-home pay) or maintenance costs (another est. 8% of my pay).

I have no debt, and I can live very frugally. Currently, my non-housing expenses are $800/mo, about 23% of my take-home pay, and I could still tighten up the budget by quite a bit. I'm pretty risk-averse, and I don't like the idea of being house-poor. On the other hand, I don't expect to be able to increase my earnings significantly, pretty much ever, and I seriously doubt that houses will go down in price in my area. (The local economy is very strong and the area is growing rapidly.) I don't want to rent for the rest any more, and I feel like I can't save up money faster than housing prices are increasing.

Because of these circumstances, I'm very tempted to jump into home ownership, knowing I will be house poor.

Three questions:

1. How terrible of an idea is this?

2. If I do choose to go this route, how can I mitigate some of the risks involved?

3. What other options might I have, besides moving or changing jobs?