We all think about our dream home in grand terms, but usually financial considerations bring our dreams down to reality. How do you make the best of that reality? Planning. Think ahead about what you need in your new home; then give thought to what you want.

Needs:

Certain aspects of your decision are must-haves. You're spending a great deal of money on this purchase and you'll probably be in the home for some time. Don't settle for anything less than what you feel is a necessary element in your new home.

Wants:

Your second consideration is for items that you want to have. Let's call it your wish list. Things that would be nice, but may not be necessary to your housing decision. Rank your wants by priority: Things you really want rank highest. Come to a balance between your needs and wants. When you're done, you'll have a pretty good idea of the home you should buy. Your list will tell you which homes are not right for you. It will also help you pare down the remaining choices. Your final choice should have everything you need and some, if not most, of the things you want.

If you don't plan on living in the home for more than a couple of years, then you should be more flexible about what you'll accept. For example, buying a home with extra room to accommodate your future plans for children takes on less importance if you'll be moving on instead of growing into your home. If you're there for the long haul, however, planning ahead for a possible growing family or the care of elderly parents may be important to you.

Don't forget about adjusting your list to the marketplace. If it is a buyer's market (a market where home sales have been slow, thereby decreasing home prices), you may be more selective, since—as a potential buyer—you'll be calling the shots. If housing is scarce, you may need to trim down your requirements to keep within your budget.

Your Wants and Needs Checklist will be an important reference for you in determining what home is best suited to you and what you can afford. Complete it carefully. Giving matters some thought now will make your future decisions much easier.