First, your Realtor should be answering this question for you, not your loan officer. As noted below, the net bid to HUD is the key to winning the property. If your real estate agent says you can afford to have HUD subtract the $3k, then that's the advice you want. Since you can't really buy HUD homes without a registered HUD Realtor, just ask -- that's what they're paid for.
As to re-running your file, that is a 2-minute process on AUS. The big issue with VA is the slowness of getting the whole thing done. If you don't already have your certificate of eligibility, for example, that can take as little as 10 minutes or as long as 2 weeks. The appraisal will be fast.
So, why the concession for non-allowables? Because there are things VA does not allow you (and me) as veterans to pay for. Typically, Origination, Appraisal and Credit Report are the totality of allowed expenses. So, who is going to pay for the survey, inspections, tax certificates, processing fee, admin fee, closing fee and so on? The seller. It isn't that you may or may not have the money -- the rules say you can't pay for them.
So, if your Realtor says the net to HUD needs to be x, and your loan officer tells you that you need y to cover the non-allowables, then tell your Realtor to increase the net bid x to cover y and add y on the seller-paid closing costs on the bid.
Since I can't tell if you have already bid and are waiting for closing, or are just trying to bid, if the situation is the former, you'll need your Realtor to contact the M&M company to discuss modifying the contract.

I am a veteran, loan officer - including VA, and a Realtor

Fri Jun 13 2008, 18:59

First question is if you have the funds to cover the closing costs, why add the burden of $3,000 in seller concessions to a loan? Don't go borrowing just for the sake of it. Then, you have to consider if the home is close to what it will appraise at. Pushing the envelope by adding costs can bite you when the appraisal comes in. I second the earlier comment about a lot of paperwork and time if you don't secure the bid. Typically, these are done with a company licensed by HUD to move their inventory. While the agent responsible for the property seems adversarial, they can actually be a good source of info about the process. Take their advice on pricing or what to offer with a grain of salt, but they can be invaluable if they are willing to walk through the process with you on the particular property you're interested in. Most HUD homes will pay a buyer agent's commission, and getting a buyer's agent, since it's your first house, could also prove invaluable. About.com has a good overview of the processs, I added the weblink in the answer.

Wed May 14 2008, 18:20

Sean
You need to have your financing totally in place. No if ands and buts about it. Your closing cost as far as HUD is concerned will be only your prepaids. The balance have to do with your loan.
Do you now the home you will choose will go VA. , If you have viewed any of them some if not most won't.
HUD will not pay the additional closing cost required for a VA loan on a min. bid.
HUD works on a NET bid. What does your agent say.
If you do not have an agent yet I can put you with one in your area.

Good Luck

Margaret

Wed May 14 2008, 18:19

If the HUD is in the bidding process with 100's of others it's alllllloooottttttt of paperwork involved if you don't secure the bid.... however in some instances a seller can contribute towards closing costs I don't know all the particulars some require $X,XXX amount other offers can include up to $5K depends on the cost of the home. It all sounds right.

NOTE: I am a Dallas home mortgage loan officer, Dallas real estate agent

Wed May 14 2008, 17:35