We have a customer who makes $100,000 per year and is paid 40% as base salary and 60% as per diem. They have been employed with the company for 7 years and their pay has been handled this way since the first year. Their tax return only reports the base salary of $40,000. The customer has provided a contract with their employer that spells out the total compensation of $100,000 and the per diem pay is one of their pay options. In other words, the customer will could get paid $100M per year as base pay if they were to chose that option. Can I use the full $100,000 to qualify them for a QM loan. I could not find anything related to this issue in Appendix Q. Thanks for your help!

Per diem??? What do you mean per diem?? You can get paid per diem for expenses such as food and lodging, but that would be a wash as those are expected reimbursements for actual expenditures.

Other than that, I am unsure how they escape IRS income reporting requirements. And since it doesn't show up as income anywhere and it is supposedly for the reimbursement of actual expenses, I'm not sure how you can translate that into income.

The customer maintains a primary residence over 100 miles away from their workplace and choose take of advantage of the tax code by taking a portion of their pay as per deim. The per diem is used as "housing allowance" to pay for a secondary residence closer to their office. The total income amount of $100,000 is reflected on their pay stubs with 40% shown as salary and 60% shown as per diem. Thanks for your help!

Like I said, it is not income. It is expense reimbursement.

The per diem is used as "housing allowance" to pay for a secondary residence closer to their office

The following exerts from Appendix Q do not directly address the situation but they do give some guidance in what to maybe look for when using this type income.

9. Employer Differential Payments. If the employer subsidizes a consumer's mortgage payment through direct payments, the amount of the payments:

a. Is considered gross income, and

b. Cannot be used to offset the mortgage payment directly, even if the employer pays the servicing creditor directly.


The following premise that only the amount that exceeds the actual verified expenses are considered income would be applicable IMO.

12. Automobile Allowances and Expense Account Payments.

a. Only the amount by which the consumer's automobile allowance or expense account payments exceed actual expenditures may be considered income.

b. To establish the amount to add to gross income, the consumer must provide the following:

i. IRS Form 2106, Employee Business Expenses, for the previous two years; and

ii. Employer verification that the payments will continue.

c. If the consumer uses the standard per-mile rate in calculating automobile expenses, as opposed to the actual cost method, the portion that the IRS considers depreciation may be added back to income.

d. Expenses that must be treated as recurring debt include:

i. The consumer's monthly car payment; and

ii. Any loss resulting from the calculation of the difference between the actual expenditures and the expense account allowance.