Choosing the right loan type can save you tens of thousands of dollars over the life of your mortgage. But with so many options — FHA, Conventional, VA, USDA, ARM — it is easy to get overwhelmed. This guide breaks down the three most popular loan types for Northern NJ buyers, with real numbers based on local price points.
Published April 2, 2026
The Quick Comparison
| Feature | FHA | Conventional | VA |
|---|---|---|---|
| Current Rate | 6.10% | 6.46% | 5.50% |
| Min Down Payment | 3.5% | 3-5% | 0% |
| Min Credit Score | 580 | 620 | No minimum (lenders typically want 620) |
| Mortgage Insurance | Yes, for life of loan | Yes, until 20% equity | No PMI ever |
| Loan Limit (Bergen/Hudson) | $557,750 | $766,550 | No limit |
| Best For | First-time buyers, lower credit | Strong credit, higher down payment | Veterans and active military |
Scenario 1: Buying a $425,000 Home in Hackensack
Hackensack is one of Bergen County's most affordable towns, with 11 active listings averaging $432,000. Here is how each loan type compares on a $425,000 purchase:
FHA Loan
- Down payment (3.5%): $14,875
- Loan amount: $410,125
- Monthly P&I at 6.10%: $2,490
- Monthly MIP: $243
- Total monthly (P&I + MIP): $2,733
- Cash needed to close: approximately $20,000 to $22,000
Conventional Loan
- Down payment (5%): $21,250
- Loan amount: $403,750
- Monthly P&I at 6.46%: $2,541
- Monthly PMI: $202
- Total monthly (P&I + PMI): $2,743
- Cash needed to close: approximately $27,000 to $29,000
- PMI drops off at 20% equity (roughly 7-9 years with normal appreciation)
VA Loan
- Down payment: $0
- Loan amount: $425,000
- Monthly P&I at 5.50%: $2,413
- Monthly PMI: $0
- Total monthly: $2,413
- Cash needed to close: approximately $3,000 to $5,000 (closing costs only)
- VA funding fee: 2.15% ($9,138) — can be rolled into the loan
Winner at $425,000: VA loan saves $320/mo over conventional and requires almost zero cash upfront. FHA is the runner-up for non-veterans with limited savings.
Scenario 2: Buying a $700,000 Home in Fort Lee
Fort Lee is one of Bergen County's hottest markets, with 52 active listings averaging $701,000. At this price point, the comparison shifts:
FHA Loan
- Not available. The FHA loan limit in Bergen County is $557,750. You would need to bring the price down or use a different loan type.
Conventional Loan
- Down payment (10%): $70,000
- Loan amount: $630,000
- Monthly P&I at 6.46%: $3,966
- Monthly PMI: $315
- Total monthly (P&I + PMI): $4,281
- Cash needed to close: approximately $80,000 to $85,000
VA Loan
- Down payment: $0
- Loan amount: $700,000
- Monthly P&I at 5.50%: $3,975
- Monthly PMI: $0
- Total monthly: $3,975
- Cash needed to close: approximately $5,000 to $8,000
Winner at $700,000: VA loan again — $306/mo cheaper than conventional with 10% down, and you keep $70,000 in your pocket. For non-veterans, conventional is the only option above $557,750.
Scenario 3: Buying a $550,000 Condo in Jersey City
Jersey City's condo market sits right in the sweet spot where all three loan types compete. With 18 active listings averaging $736,000, condos in the $500,000 to $600,000 range are the most accessible entry point.
FHA Loan
- Down payment (3.5%): $19,250
- Loan amount: $530,750
- Monthly P&I at 6.10%: $3,222
- Monthly MIP: $314
- Total monthly (P&I + MIP): $3,536
Important note: Not all condos are FHA-approved. The condo association must be on the FHA-approved list. Check with your lender before falling in love with a specific unit.
Conventional Loan
- Down payment (10%): $55,000
- Loan amount: $495,000
- Monthly P&I at 6.46%: $3,116
- Monthly PMI: $248
- Total monthly (P&I + PMI): $3,364
VA Loan
- Down payment: $0
- Loan amount: $550,000
- Monthly P&I at 5.50%: $3,123
- Monthly PMI: $0
- Total monthly: $3,123
Winner at $550,000: VA loan saves $413/mo over FHA. Between FHA and Conventional, conventional wins by $172/mo if you can swing the 10% down — plus PMI eventually drops off.
The Hidden Costs to Watch
FHA Mortgage Insurance Premium (MIP)
FHA's biggest downside is that MIP never goes away if you put less than 10% down. On a $500,000 loan, that is roughly $295/mo for the entire 30-year term — over $106,000 in total. The only way to remove it is to refinance into a conventional loan once you have 20% equity.
Conventional PMI
Conventional PMI automatically cancels at 20% equity (based on the original purchase price). You can also request early removal at 20% equity based on current appraised value. This makes conventional more attractive long-term than FHA for buyers who can afford the slightly higher down payment.
VA Funding Fee
The VA funding fee (2.15% for first-time use with zero down) adds to your loan balance, but with no monthly PMI and the lowest rate available, the math still works heavily in favor of VA borrowers.
Which Loan Type Should You Choose?
Go FHA if:
- You have a credit score between 580 and 679
- You have less than $25,000 saved
- You are buying under $557,750 in Bergen or Hudson County
- You plan to refinance within 3-5 years when you build equity
Go Conventional if:
- Your credit score is 700 or higher
- You can put 10-20% down
- You are buying above $557,750
- You want PMI to automatically drop off
Go VA if:
- You are a veteran, active duty, or eligible surviving spouse
- Period. The rates and terms are unmatched regardless of price point.
Run Your Own Numbers
Every buyer's situation is different. Use our free BuyersMath calculator to compare all three loan types side by side with your specific price point, credit score, and down payment.
Rate data from Freddie Mac PMMS, April 2026. Loan limits from FHFA 2026 conforming loan limits. Northern NJ market data from NJMLS and Hudson County MLS.