Best way to use equity on new purchase owner financed home

[Katherine Linza]

I am currently renting the home I am planning on purchasing, it will be a private sale with owner financing. The owner has had the home since it was built and is tired of renting. We are looking at a purchase price around 64k, but the home last appraised for 130k. I am looking to get traditional financing to make a lower monthly payment because it will be $700/month with the owner financing agreement. I have spoken with a few lenders and they have all told me it will be very hard to get a mortgage for more than the purchase price to allow for renovations, even though it's way under appraisal value. I'm not sure what the best route to take would be as I'm a first time homebuyer. I don't have money for a down payment and there are improvements that need to be made to the home that I want to use the equity for, so I thought maybe apply for a HELOC or home equity loan first since I will own the property once we sign the contract and then use some of that money towards the downpayment to pay off the seller and then I will be making lower payments. Is this possible or do I have any other options?