I looked for an answer to this but all I was able to find was questions about wielding two handed weapons in one hand.
I remember a rule somewhere that stated if a character used a large one handed weapon with two hands it counted as a two handed medium weapon without penalties.(Example: Wielding a large Longsword with two hands would make it count as a two handed weapon)
Is this a House-rule that I confused as an actual rule or is this actually a rule somewhere?
Yes, that is actually an official rule. Though there is also a -2 penalty for using a weapon not meant for your size.
http://www.d20pfsrd.com/equipment---final/weapons
Also Page 144 of the Core Rulebook
Weapon Size
Every weapon has a size category. This designation indicates the size of the creature for which the weapon was designed.
A weapon's size category isn't the same as its size as an object. Instead, a weapon's size category is keyed to the size of the intended wielder. In general, a light weapon is an object two size categories smaller than the wielder, a one-handed weapon is an object one size category smaller than the wielder, and a two-handed weapon is an object of the same size category as the wielder.
Inappropriately Sized Weapons: A creature can't make optimum use of a weapon that isn't properly sized for it. A cumulative –2 penalty applies on attack rolls for each size category of difference between the size of its intended wielder and the size of its actual wielder. If the creature isn't proficient with the weapon, a –4 nonproficiency penalty also applies.
The measure of how much effort it takes to use a weapon (whether the weapon is designated as a light, one-handed, or two-handed weapon for a particular wielder) is altered by one step for each size category of difference between the wielder's size and the size of the creature for which the weapon was designed. For example, a Small creature would wield a Medium one-handed weapon as a two-handed weapon. If a weapon's designation would be changed to something other than light, one-handed, or two-handed by this alteration, the creature can't wield the weapon at all.
Some DM's may handwave the -2 penalty for certain things. There really isn't that much of a difference between a shortspear meant for a medium character and a spear meant for a small character. An large creature's one-handed club is not that different from a medium creature's greatclub. That would be the place that a houserule would most likely come into play.
