That's either an overlay or a LO that doesn't know his guidelines.From FannieMae.com direct:

Option 3 is a lease option scenario is the main diff with mine, and I start with all cash, then grow the price with SF and a LO as option 2 or 3. 

If I need 2 years to come up with that for whatever reason, I could do a LO, put 3% down ($15k) and then would only need an additional $85k at closing to satisfy the 20%. 

We are considering picking up our 3rd STR via a LO as a way to get a property quickly vs. waiting to accumuluate the 20% down payment required to finance.My questions is, since I would not be the owner on the deed, would I have issues with obtaining a business license to operate a STR and pay the hotel/motel and sales taxes or would I need to involve the owner of the property?

And yes....you can do a LO on a house that has a mortgage. 

I'm offering my primary residence as a LO. 

I'm offering my primary residence as a LO.

There are relatively few restrictions when a non-consumer is on the receiving end of the transaction.If you are dealing with a LO to a consumer, anything less than 6-months is pretty much fair game.

The real question is "If I do a LO and the resident fights it what happens?"

I heard South of PCH and west of Palos Verdes Blvd are not permitted for ADU.