Simon's Baby Mama Lauren Silverman -- Custody or California ... Choose One

Simon Cowell's baby mama Lauren Silverman is playing “LET'S MAKE A DEAL” with estranged hubby Andrew Silverman -- and door number 1 is custody … door number 2 is living with Simon in California.

As TMZ previously reported both Lauren and Andrew want custody of their 7-year-old son. Sources connected to couple tell us they are still in active negotiations to settle the divorce, which involves not only custody but finances and division of property.

Our sources say everyone in the negotiation --- including Lauren --- has conceded that she cannot move the kid 2475 air miles away from Andrew ... a judge would never buy that anyway. As a result we've learned Lauren is in the final stages of getting a NY apartment and has even taken steps to set up shop there.

Our sources say it's pretty obvious in the end neither Lauren nor Andrew will have full custody – there will be a division…. something like joint custody.

If, however, Lauren decides to move to California to be with Simon and their unborn baby, we’re told her parental role with the 7 year old will diminish significantly.

One source connected with the couple tells us … Lauren is considering the move in part because the Beverly Hills estate provides more of a shield from public scorn than the crowded streets of New York.