Ghost them, and if they press you, respond with, "Sorry, we selected an applicant who better met our screening criteria"

After pressing her if there is any signs of moisture, water intrusion, or any visible mold ANYWHERE - I was told no, but that the tub had some black "stuff" around the perimeter (me - likely mildew...), but it has been there since she moved it.The tenant notified me that the basement in the building has " flooded" recently and she's concerned that there is mold in the air and got into her unit (4 stories above...).

When I said $500 earlier I was just being optimistic, you’d be hard pressed to find anything that high. 

@Nathan G.I would absolutely press the parent button.

It sounds like you aren't raising the rent all the way to market, so when or if she starts looking around she will be hard pressed to find a better deal.We like to raise rent to the halfway point of the gap between current and market rent.I would give her as much warning as possible, would say/write that costs and market rent have gone up, that market rent has been assessed at $xx and rent will be going to $xx starting on x/x/xx. 

If the tenant presses you simply add that you would be happy to look into what it takes to get into the program and getting the property inspected however you will rent to the first qualified applicant that can move in the soonest. 

I did speak with a friend of mine in the lending field and walked through his banks income calc and sure enough the schedule e income gets calculated is a very tricky way that I would be hard pressed to recreate on my own.

I pressed hard on them to explain how credit cards could be turned in actual cash to buy a property.

Don't press her into pursuing this with you.Second, this sounds like too much of a business partnership than a marriage relationship.  

The first and most pressing issue a landlord needs to deal with when considering any rental income property is how is the venture going to be funded?