Loan interest is deductible based on the use of the loan, not the asset securing the loan. 

Most agency loans will expressly forbid such an arrangement, so if they found out, the odds of having the loan called would be very high. 

There are DSCR lenders will allow only a single 20 or 25% owner of an LLC to sign a Personal Guarantee (other owners are not on the loan, or liable for the loan).

Unlike refinancing, which involves taking out a new loan, recasting keeps your existing loan terms—including your interest rate and loan duration—intact.

Did you try a local CU or bank for a construction to permanent loan?

If you are willing to live in urban areas you may want to talk to a local bank in your market and see if they have any incentives or grant loans for certain areas.  

If I got a home equity loan for Property 1 and used the proceeds as downpayment for Property 2 and then got a 2nd loan for the remaining 75% purchase price for Property 2, when I sell Property 2, can I use the Property 1 loan as part of the cost basis for computing Property 2 capital gains?

I doubt he'll be able to quality for a loan (VA) with just his income. 

Kathy, check out Anchor Loans as a comparable. 

Just sell and pay off that loan or two.