Great tips from everyone. A few to add:

1. Get a sewer scope done when you do your inspection. You'll find out if there are any major issues and you might be able to negotiate with the seller to pay some or all of them. This is important since issues could run you thousands.

2. Make sure you sit down on the toilet, stand in the shower, tape out what a queen (or king) sized bed would look like in the bedroom. You'd be surprised how big of a deal these things can be.

3. Really, really, really consider the neighborhood. Location is the one thing you can't change. Houses in sketchy neighborhoods might be cheaper, but is it worth it if you're worried about safety? And make sure the schools are good in your 'hood. It's no good saving a little on a house and then having to send the kid(s) to private school. Other things to consider--is it walkable? Does it seem like there would be good neighbors? Are you in a flood vulnerable area? Are there parks nearby?

4. Time your commute from your new house at rush hour.

5. Is there room for expansion? Could you add out the back, finish a basement? Look at the house for the long-term, or decide this is a starter house and you're fine moving on in 5-10 years. If you can't see yourself living there for at least 5 years, don't buy it. The market is too volatile right now to buy anything you can't hunker down in for awhile.

The Rev's got it covered, but I'll add an emotional angle: be prepared for about five years of hair-trigger panic. It was about that long before I stopped holding my breath every time I came around the corner from going to the store, hoping that house was still there. And every time something breaks or creaks in the middle of the night, you're going to be thinking "oh my god, here we go, it's falling apart, we'll be crushed by the falling ceiling".

If you don't have enough for the 20% down payment, try for a house that has a sale price lower than its assessed value. Its market value should rise (operative word is "should") where you can, in two years' time, request the Private Mortgage Insurance to go away. The PMI is a minor, short-term penalty.

A three-bedroom house will be easier to resell than a two-bedroom. Try for a house within the city, but not necessarily new construction, for good value. Investigate the Walk Score (tm?) for a neighborhood.
A plus would be to find a neighborhood that the City of Seattle Planning/Development is in the process of revitalizing. You could look at Seattlecrime.com's crime maps or the City of Seattle Neighborhood Crime maps to see how safe a neighborhood is.

If your mortgage payment is initially and significantly larger than your rent payment, payments will feel like a bite for quite a while.

Be sure to budget in trips to your hardware/home improvement store of choice.

1. A big one: We got a lemon because our inspector missed a shit ton of problems and we didn't yet have home-buying instincts. We found him through our realtor. Next time I'd use Angie's List, and I'd have two separate inspections from two separate companies, which would have saved us a _lot_ of money in the long run. I'd find my realtor on there, too.

2. For that matter, get an Angie's List subscription. Do a search for coupon codes first and you can get about a third off the first-timer price. The site has found us some excellent contractors, from handymen to blinds installers to dryer vent cleaners.

3. Minor suggestion: Get a home warranty for the first year. It's a relatively small price (ours was something like $300) that pays at least a portion of the cost of many of the things that can break. Ours paid itself off and more on a new water heater and a new dishwasher (both were very old, and crapped out soon after we moved in).

4. Like others have said, neighborhood is crucial. You'll be living here a while, and the whole time you'll have to make that commute every day (imagine rush hour traffic flow from work to home and vice versa), go to the grocery store, live next to those neighbors, deal with crime. We looked at a beautiful house, with a tree-filled backyard, that was surprisingly cheap while also not far from the city. Unfortunately, while it wasn't at all rural it was on a weirdly isolated street right next to a house with a Dino Rossi sign on the lawn and the nearest store 15 minutes away. Living there would've made for a lonely existence. Along the same lines, if you want local friends to visit, don't move an hour away from all of them.

5. Don't get anything you can't afford. Things _will_ go wrong, and you'll either have to pay to get them fixed or live with water damage or pests or foundation cracks or whatever. Take your time choosing, and don't be pushed into anything. We were lucky to be able to fix up our lemon, but that doesn't always happen and you shouldn't feel like you got sucked into something you can't handle and can't get out of.

6. I'm not sure what you need in terms of space and bedrooms, but extra space is nice if you want to have friends and family stay with you without cramming them into your storage/office/guest room. On the other hand, if you're lucky enough to get more space than you need, don't go buying things to fill that space; it's a waste of money and makes moving later even more of a pain. And before you moved in you were able to live with what you had, so don't rush buying extra lamps or guest beds or whatever--take your time and look at Craigslist, poach from friends who are moving, etc.

I'm sure I can think of more, but this is plenty long already. Good luck!

Great answers here. I would just add a couple of things:

When vetting a neighborhood, check to see if there is a community blog, and read through the archive. CentralDistrictNews.com is a great one - it covers the crime beat, the flooding issues, bus service and school stuff, as well as a ton of miscellany.

Have your broker line up a very good inspector to do the inspection, and don't make an offer that's not inspection- and financing-contingent.

Find a broker that knows what you are looking for and knows the neighborhoods you are looking in. I have a great one - he was recommended by a couple of different friends and I've sent people to him, all extremely happy with the results. He spent a day with us showing us all the neighborhoods with homes in our price range, just to get an idea of what we liked. If you can find a way to message me, I'll send you his info.

If you are buying a house that needs fixing, plan on spending 3x the time and money to get it done. Fixers can be great first time buys, even with a baby getting in the way of construction - just make sure you can make a portion of the place livable immediately, and that you can do the rest of the work as you go along there. It's a great way (even in this economy) to build that 20% equity to get rid of the mortgage insurance too. Just do the work that needs doing and have the place reappraised later.

Finally, take half a Xanax before you go to sign the mortgage documents.

Do your best to get that 20% down payment. Not doing so will cost you, because you will have to get either a higher rate 2nd mortgage to cover the difference, mortgage insurance (PMI), or, depending on your credit, both. If you can't get the 20%, it's not the end of the world, but make a payment plan to make that 2nd mortgage go away ASAP.

As far as the house, the things I'd be most worried about would be the sewer (lots of old concrete sewer lines in Seattle, avoid big trees on or near the property) and mold (any signs of a leak are bad news), because both repairs would be very expensive, and it would be difficult to estimate the cost ahead of time. I agree with the Rev on the inspector. That is very important. Some things aren't necessarily deal killers, but you can probably take them off of the price in this market. For example, if the roof, furnace, water heater, etc needs replacing anytime in the next couple of years, the seller will probably pay for it.

The saddest OMG! stories I have heard are from people who hate where they live vs what they bought.

If you are going to be renting for at least two more years before buying a home, try to rent where you are most likely to buy. Get to know the area intimately before making a huge investment there.

One of the biggest problems for 1st time buyers is they rent an apartment in a trendy place, a place where they could never afford to buy a house, and then start choosing house based on the "it" vs the "where".

Look at homes on the internet and target areas that have homes you will likely be able to afford when the time comes. You can use 3X gross income as a general rule of thumb for this purpose.

Spend a lot of time in advance choosing the right where for you. People who know exactly where they want to live, are usually much better off in the long run.

Keep an open mind on how to buy your house. There are other options than a traditional real estate agent that can save you quite a bit of cash. Assuming you're smart and able to do some of the legwork on neighborhood research, it might be a good option. Check out www.walawrealty.com. They're real estate agents and lawyers -- they do a flat fee, but you get 100% of their commission back!