Translation:When we were buying the house, it looked much bigger.
nearly nobody would say it like that (using progressive) in English, because the first part of the sentence gives a point in time (then/at that time, when we bought the house). The situation would be different if the complete sentence would be something like "when we were buying the house (= when we in the process of buying / just about to buy), suddenly a thunderstorm came up and removed the roof".
Seems fine to me. I picture them walking through with a real estate agent and thinking about how much room they'll have.
That's seeing the house, not buying it. I would also assume that 'when we were buying' means something happened in the very act of signing the contract.