We are considering offering construction loans with an 18 month term ending with a balloon payment (which will make the borrower's DTI higher than the sky). Can we show ability to repay by qualifying the borrower for the long term financing which pay off the construction loan, or do we need to show the borrower has other assets or income available to pay off the balloon?

Another loan does not constitute ATR. You would have to qualify them for the balloon payment. Just make it for 12 months and renew/extend if required.