1st: Before cruising homes and getting house-smitten, get all your finances in a row: Get a letter in writing that specifies that you are both pre-qualified and pre-approved for 'x' amount. Ask your broker and/or realtor about all the final costs and what the "high end" of those costs would be. Budget for everything coming in on the high end (perhaps use the spare change to decorate ;) ) Don't forget to keep 3 or 4 months worth of mortgage payments in the bank as 'padding'.
Has your family made your wishlist / list of dealbreakers?
Picking:
Avoiding a lemon, IMO, is all about instinct and Inspection: Hire an inspector who is willing to give references. Then, check those refs. Better yet, ask a friend for a ref for an inspector.
As far as instinct, that comes down to the walk thru: if the house smells like death and feels cursed by the demon of bad decor, go ahead and take a pass. Tell your realtor: "nope, sorry - bad vibe". If she/he doesn't respect this, it's time for a new realtor.
If the list of "things we'll have to do right when we move in" involves hiring 2 contractors or goes longer than 5 items, then it's probably more trouble than it's worth.
One last note: if you are 2 adults and a baby, get enough bedrooms that you are covered if it becomes 2 adults and a kid and 'Ooops one more'.
Kudos for avoiding the variable rate traps. Good luck!!