Fine ! Your setup looks good, we can go ahead with DNS part 
That’s a very good point !
But setting DNS to 127.0.0.1 will lead to a complete closed system, limited to your server 
I assume you want to connect your phone to your server, using your local network ?
So we have to “open” your server to your private network.
We’ll have to setup a home private DNS ecosystem. It is not that hard
Before anything else, we’ll have to know how it works at your home :
- how are the IP address distributed
- which DNS address and domain are provided by DHCP, or manually setup
- if DNS devices records are dynamically set up by DHCP
I assume these services are provided by ISP set-top box ?
In this case, can you access the settings, for example :
- turn on/off the DHCP
- modify the DHCP-provided parameters, such as DNS server IP address and domain
- modify the DNS domain, zone records
- Dynamic DNS setup (DNS records set up by DHCP server)
?
We could use several solutions, I’ll try to provide you with the best one according to your home setup.
The idea beneath is to setup a whole /e/ Cloud including DNS.
Yes, it would also include an /e/ email server for ease of setup, but you won’t have to use it Access to your Internet email provider could be achieved by DNS forwarders.