Having trouble understanding seller financing!

[Jimmy Lieu]

I have two quick questions on seller financing that I am having trouble understanding so far:

1. 1. If someone sells you a property with seller financing with an inflated (a way above market value) price, how can the you, as the buyer, be screwed from not being able to get financing? Is it because at the end of the balloon, the bank won't provide financing because I will need 20%?
2. 2. How do you determine if you want to structure your seller financing deal as interest only, principal only, or principal + interest?

Thanks so much guys, greatly appreciate the help!