Jeremy Lin has signed a three-year offer sheet with the Houston Rockets, according to a source close to the talks. The deal is worth a little more than $25 million — $5 million in the first year, $5.225 million in the second year and $14.8 million in the third year. The Knicks have three days to match the Rockets’ offer.

Initial reports had the Rockets offering Lin a four-year deal for around $28 million. That deal included salaries of more than $9 million in each of the last two years, which would be a big hit on the Knicks’ cap. Still, the organization seemed intent on matching.

“They will match any offer on Lin up to $1 billion,” a source told ESPN.com’s Marc Stein last week.

It’s not clear, however, if the new deal changes that thinking since the third year of the current deal carries an even bigger cap hit.

Houston had a verbal agreement with Lin before the team emerged as a serious suitor for Dwight Howard. The Rockets will use the amnesty clause on forward Luis Scola, sources told ESPN.com’s Marc Stein, creating salary-cap space to take on bad contracts from the Orlando Magic. But the Lin offer sheet and an identical offer to Bulls center Omer Asik complicate the financial details of any trade with Orlando.

Lin, a restricted free agent, made $788,000 last season when he averaged 14.6 points, 6.2 assists and 3.1 rebounds in 35 games with 25 starts before his campaign was cut short because of surgery to repair torn cartilage in his knee.

But in the 35 games he was healthy, Lin went from an end-of-the-bench afterthought to an international phenomenon. The undrafted guard out of Harvard, who was cut twice in the preseason (once by the Rockets) and played in the D-League, set the league on fire in February, leading the Knicks to seven consecutive wins. He scored at least 20 points in nine of 10 games during that stretch.

Source: ESPN