Is this HUD owned or Fannie Mae Home Path? How long has it been on the market? Are you asking for closing help or will you pay your own closing cost? (Paying your own puts you in a better bargaining position usually)
What amount of down payment gives you the best interest rate?
NEVER NEVER forego home owner's insurance unless you are willing to take a total loss (think of a fire, tornado, etc).
Are you willing to live in the house for one year before turning it into a rental?
I bought a VA foreclosed house. Ask was $45,500. I offered $36,000. They countered at $45,000. I re-countered at $40,000. The came back at $44,500 with no closing help. I bought it (it was still a pretty good deal). They said "cash only" and I had my bank write a letter that I had enough on deposit. I paid by check. I could have paid with a mortgage note (seller's can't force the method of payment).
So, it depends.