Conventional Loans — The Most Common Choice
Conventional loans are not backed by the government. They require 620+ credit score (740+ for best rates), typically 5–20% down. With 20%+ down, you avoid Private Mortgage Insurance (PMI). Conforming limits in 2025 are $806,500 for most of NJ and NY — above that you need a jumbo loan. Best for: strong credit, stable income, 10–20% down.
FHA Loans — For Lower Down Payments
FHA loans are backed by the Federal Housing Administration. They require only 3.5% down with a 580+ credit score (10% down with 500–579). FHA loans always include MIP (Mortgage Insurance Premium) — an upfront 1.75% and 0.55–1.05% annually. Best for: first-time buyers, lower credit, or limited savings. Loan limits in NJ/NY high-cost areas are higher than national baseline.
Jumbo Loans — Above Conforming Limits
For loans above $806,500 (most of NJ/NY metro area), you need a jumbo mortgage. Jumbo lenders typically require 700+ credit, 20–25% down, and significant asset reserves (often 12+ months of payments in savings). Rates are typically competitive with conforming rates. Best for: buyers purchasing above $1M in NJ/NY.
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VA Loans — For Veterans and Military
VA loans offer 0% down, no PMI, and competitive rates for eligible veterans, active duty, and surviving spouses. There's a funding fee (1.25–3.3% of loan), but no PMI saves you significantly over time. Loan limits for VA were removed — you can borrow any amount with full entitlement. Best for: eligible veterans buying in any price range.
NJHMFA Programs for First-Time Buyers
New Jersey's Housing and Mortgage Finance Agency offers below-market interest rates and down payment assistance for first-time buyers. Income limits apply. The Smart Start program pairs with a conventional or FHA loan and can provide $10,000+ in DPA. Check eligibility at the NJHMFA website before choosing a lender.
Frequently Asked Questions
Common questions about this topic.
3% for first-time buyers via Fannie Mae's HomeReady or Freddie Mac's Home Possible programs. 5% for repeat buyers. 20% to avoid PMI.
Generally 740+ gets the best pricing. The jump from 679 to 720, and 719 to 740, typically saves 0.25–0.5% in interest rate, which translates to thousands over the life of the loan.
Depends on your credit. With 620–680 credit, FHA often offers better rates. With 700+ credit, conventional with 3–5% down usually wins due to eventual PMI removal (FHA MIP stays for life of loan if you put less than 10% down).
For 2025, FHA limits in high-cost NJ counties (Bergen, Hudson, Passaic, and others) are $1,149,825 for a single-family home. Standard NJ counties have a baseline of $524,225.
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