Yep, don't buy what you are approved for, but what you can comfortably afford. I bought my house last year, and even doing an FHA loan I was still paying less that I was in rent and now have the tax deduction. And with my "Obama money" I only ended up being out about 9k out of pocket for the whole initial purchase. For me I was tired of renting and wanted something I can do what I want with and not worry if the dogs had an accident or destroyed something. Just remember you are responsible for EVERYTHING that goes wrong with the house. All those little things can add up big over the year so remember to budget for repairs and maintenence.
Once you make an offer you are bound if it is accepted, if they come back wanting different terms you are no longer locked in.
For interest rates, shop around. And they do change, I had mine knocked down a quarter percent a week before closing. And if you are planning on staying a long time, it's worth it to buy down the loan a bit. I plan on living here forever so it was well worth it to me. As for being bound to the lender, that is not true, at least here in CA, unless you have a signed acceptance offer and submitted all your paperwork to the bank. Just remember it's a long process and it's hard to change lenders mid stream and make your closing.
And pay attention to whether it's a short sale, forclosure, or straight sale, as there's different plusses and minuses to each. Mine was a short sale but luckily went pretty quickly. They did try to screw me at the end though with the bank holding the second. They waited till the last minute to ask for more money, even though I thought everything was squared away. Luckily for me the seller and my agent took care of most of it to make sure the deal went through.
Oh, and offer what you feel comfortable with. Don't worry about the asking price, or what percent you can get off of it, just look at the comps and what seems to be a fair and reasonable price to you. So much depends on the market in your area and the current buying conditions. I bought my house when there was very little competition around here. Then four months later all of a sudden every house was getting 8 offers and they were going at asking or above. Now it's cooled off again. So really, don't worry about anything but what you are comfortable with and what you think the house is worth. Picture it like bidding on cbid.
Good luck.
