Buying your first home is an exciting milestone that you've probably been looking forward to for years. After getting pre-approved and choosing your real estate agent, it's time to start considering what you are looking for in a house. Many first-time buyers wonder whether they should choose a starter home or a forever home.

To help you determine which is the right path for you, consider these factors in selecting between a starter home and a forever home.

What is a starter home?

A starter home is loosely defined as a home you know won't suit you forever, but fits into your budget at an earlier point in your life. This might mean it is a townhome or condo instead of a single-family home, a house with fewer bedrooms and bathrooms, or an older home in need of some TLC. It may also mean a home in one of your less-preferred neighborhoods.

Starter homes generally meet the needs of the buyer, but won't work forever. Maybe you know that you plan to grow your family and will outgrow the home, or you have other future plans that will mean you won't want to stay here forever.

What is a forever home?

A forever home is one you can imagine yourself living in for the rest of your life. This may not mean you actually do live here forever, but it's a property that you can grow into, that has all the components necessary to call it home for decades to come. This almost always means it will cost much more, and have some of those dream home features you've always hoped you would have.

Let Your Home Do the Work

While of course, most people would love to buy the dream home they can live in for decades to come from the beginning, this is often the method that will require you to work harder than you need to. Saving for a down payment and closing costs on a much larger and more costly home is a massive undertaking while getting into a more affordable home now can open up opportunities to work toward your dream home goals with the passive building of equity rather than actively saving your pennies.

If you are ready to buy a home now but are not quite ready to buy that dream home, it often makes more financial sense to begin building equity with that starter home to more efficiently work toward the goal of owning a forever home.

Homeownership of any property will maximize your savings toward a larger property, allowing your home to passively increase in value even when you are not aggressively saving for a bigger house. In many cases, just a few years in that starter home can lead you to be financially ready to upgrade to the dream house.

In nearly every case, becoming a homeowner earlier is the best course of action, even if it means compromising on the first home you purchase.