This step is a snapshot, not a plan: what comes in, what goes out, what you owe and what you have saved, recorded without optimism. Everything in Phase 2 — affordability, deposit strategy, the mortgage itself — is built on these numbers, and a lender will eventually see the unvarnished version anyway through your statements and payslips.
What lenders will ask for
Employed applicants typically provide three months of payslips and bank statements plus ID and proof of deposit. Self-employed buyers usually need two years of accounts or SA302 tax calculations from HMRC. Gathering these now tells you exactly what a lender will see and gives you months to tidy anything unhelpful.
Statements tell a story
Underwriters read bank statements. Regular gambling transactions, returned direct debits, unexplained large transfers and reliance on overdrafts all raise questions. None is automatically fatal, but each is easier to address a year out than a week before a mortgage application.
Separate your pots
Distinguish your emergency fund from your deposit savings. The emergency fund — commonly three months of essential outgoings — stays untouched through the purchase. Buyers who spend every pound on the deposit start homeownership one boiler failure from a credit card problem.
| Category | Examples | Your monthly figure |
|---|---|---|
| Net income | Salary after tax, regular freelance income, benefits | £ |
| Fixed essentials | Rent, council tax, utilities, insurance, transport | £ |
| Debt repayments | Credit cards, loans, car finance, student loan | £ |
| Flexible spending | Food, subscriptions, going out, holidays fund | £ |
| Left over | Available for saving towards the move | £ |
Your action list
Official sources
Practical tips
- Use real statement figures, not what you believe you spend — the gap is usually 10–20%.
- If the leftover row is near zero, that is Phase 2's first problem to solve, and finding out now is a win.
What can go wrong
- Rounding income up and spending down produces a budget that fails at the underwriting stage, after you have paid for surveys and legal work.
- Undisclosed debts do not stay undisclosed: lenders see your credit commitments, and inconsistencies undermine the whole application.
- PropertySquares provides education, not financial or legal advice. Verify current rules and obtain advice for your circumstances before acting.