She recently made a new payment of $800 and I received a letter saying that they received her payment but she needs to pay 4,440 by the 10th or they would proceed with lien foreclosure and eviction.

Or should I ask for interest only payments and then a balloon payment when I refinance in 12 months?

We also sent one agent a copy of our "congratulations on your $xxx HELOC" letter.  

I would probably include the following relevant/tailored info. on you: resume, short cover letter/explanation, financial info.  

Suggest 6% for 12 months on a 30 year amortized note with payments made monthly as one option or if he prefers you can make it a 12 month balloon with all monies due at 12 months with no prepayment penalty.

From 3 days of walking I wrote down 240 address, found the owners and sent letters to each one. 7 got returned, and i got 3 people to call me back.

The next step is a letter of intent after which I should have access to the P/L statements to verify everything.Any red flags right up front?

I've called around to several local banks and they are primarily offering 20 year loans with 5 year balloons.

It was 2 houses on 1 lot;  a 3/1.5 2 story 1920s balloon framed house and a garage converted into a  2/1 rancher.

Start looking at them in Zillow if they are off market write down the address mail them a letter asking if they have any interest in selling their house.