The first milestone is having enough coming in so that my wife can be a stay at home mom. 

I understand there is a method whereby I can "partner" - that might be the wrong word - with a builder such that as the builder constructs the home, I am paid out over time at milestones so that when the property is completed, the deed is signed over to the builder and it can be put on the market and sold and anything above a certain number goes to the builder after I receive my payout.This particular lot with a 2 bedroom would probably sell for about $400. 

Milestone and CalAtlantic are both building new master planned communities there.

Yet, for such a big milestone, why does it feel like only a drop of water in this large empty pool of progress?

That's quite an exciting milestone.

This would get you down to a principal amount of $80,000 (96,500 - 16,500).Once you reach the milestone of getting your principle down to $80,000 and want to refi, I'm sure the bank will want to re-appraise the property to check the current value.  

Is a "one third" down payment a reasonable milestone payment?  

There are typically building inspections at all construction milestones.

I didn't say anything about never paying them draws at predefined milestones, that is standard.

)- Contact them on all milestones ( Appraisal order, Approval, CTC, Signing date, Funding )If you can do this consistently your phone will ring consistently!!!