Seems a lot easier to register your own domain (useful for so many other things), point localhost.mydomain.com to 127.0.0.1 and run:

    sudo apt-get -yy install --no-install-recommends certbot
    mkdir -p le
    certbot --work-dir ./le --logs-dir le --config-dir le -d localhost.mydomain.com --manual --preferred-challenges dns certonly

Follow the instructions adding the TXT record, you have a valid cert in minutes.

Yes you can. You control the DNS, just point that subdomain to 127.0.0.1.