Q.  I want to purchase a home but I do not have sufficient funds for a down payment. If I get an

 owner-financed mortgage, would I be able to apply for a bank-financed mortgage in a year or so and would the money I paid to the owner count as a down payment or would I still need a separate down payment with the bank mortgage?

A.   I don’t think an owner financed mortgage is the best option for you, the problem occurs when you want to refinance to pay off the seller.  The bank will view your request as a cash-out refinance.  The current rules in place state that your new loan cannot exceed 75% loan-to-value.  You home would likely have to gain a lot of value in a short amount of time and with the current market that seem unlikely.  The only way this scenario works is if the seller will carry back for 10 years or more. 

You should consider an FHA loan which will require only a 3.5% down payment.