Wife and I work full time (mostly from home) and the kids are toddler age.

If it were not, would that mean additional fees for having it zoned as such?

Going back to your file, you banker needs to show you will reside there, if you are downsizing, it has to be a good explanation in a LOX, such as closer work commute, better school, better neighborhood, kids moving to college etc....Also there is no program with 90% LtV on a multiunit, only FHA.

Since her home was flooded due to an interal plumbing issue and the insurance company is paying to remodel the existing old (1920s) and dilapidated structure (could tell by looking at some of the 2x4 studs revealed in the partial internal demolition), I decided to find out if my mother can use the money should would receive from the insurance company in the form of a check, put that towards the remodel, and in addition secure a construction-to-permanent loan in order to fund the complete transformation of her 1 bed 1 bath 1,200 sqft home into a 2-story duplex that she can rent out, airbnb, etc.

it will depend on if it has an addition put on it.....put a deck that has a roof on it that extends over the other roof and then it starts adding value. 

These are professionals with additional training and a stricter code of ethics.

He got a 10% preferred return and 51% to me and 49% to him of any additional upside.

So for me I don't want to ink a lease ASAP with first qualified.In addition, first qualified may not mean soonest to move in. 

They are not responding and i'm not sure how to go about getting the additional money I even paid them to transfer the property to me. 

I agree with using the cash flow for additional properties.