Owner financing to bank refi

[Nathan Goldsmith]

Maybe you all can help me out here. I'm confused on some aspects of seller financing.

My sister wants to sell me her house for what she owes in it, which is 80k. It's appraised at 93k. I don't want to put a lot down. Her interest is 7% and she still has pmi until 75k is left on the loan.

I would like to offer the following owner financing.

5k down, which will bring her loan to 75k and remove pmi.

Refinance in 1 year to conventional 30 year Lon. (because I've read you need that long to get a bank to approve it)

My questions are: why can't I use appraised value in some way? Seems like I'm not getting to use that 93k number in any calculations.

Second, how does a ballon payment work? I understand the refi but not this "balloon payment" I keep seeing. Do I have to refi twice?

Thanks in advance!