The way I do it, which may or may not be the best way is to
1. create a 1 inch square and create the pattern
2. Edit -Define Pattern
3. Open a 12x12 and fill it with whatever color
4. On that layer go to Layer Style - Pattern Overlay and choose the pattern I defined.
I like to do it this way because it gives me control of how big or small to make the pattern.
I hope that makes sense and that it all works in PSE3.
