So the seller cannot go get another loan for a car, house, apartment, etc. so it damages their credit by stretching them too thin.Am I missing something? 

Have you looked into DSCR loans?

If you include the costs to build in a purchase of the primary structure, then you can typically roll that into the final loan product.

Do you mean Home Equity Loan?

Ask the builder or their legal representative for a copy of the CC&Rs (Covenants, Conditions, and Restrictions) or any supplemental documents specific to the development.Financing Considerations: If you’re financing the property, some loan types have limitations on renting out a home within the first year.

should a private lender ever ask for a 1% insurance paymentBefore completing a loan?

FHA loan.

Ken, I would prefer to do that, but I wasn't sure if any banks would offer that type of loan or line of credit.

In 30 years the balloon payment is due to the seller and that's when the taxes are due.Coupling a monetization loan to an installment sale accomplishes the same thing but puts cash in the sellers hands that can be re-invested.

Investment Info:Condo private money loan investment.