Keep in mind the seller is taking the place of the bank. He is basically loaning you the money to buy the house. He wants some assurance that you will make your payments as promised and one way to do that is a large downpayment. Another way is to charge higher than market interest.
It is always better to get a loan from a lender - lower downpayment, lower interest, lower payments, etc. Besides that, your choices of homes will be very limited. You have to find a seller willing to sell on contract. That eliminates foreclosures and almost all houses that have a loan on them.
Your best bet for now would be to work on your credit. Besides making all your payments on time, find out from the bank that turned you down what else you can do to bring your score up. Once you get your credit up, then you will be in a position to find the house you want, not just settle for a house because the owner will do a contract sale.