Ephesians 2:4-9 says:
But God, being rich in mercy, because of His great love with which He loved us, even when we were dead in our transgressions, made us alive together with Christ (by grace you have been saved), and raised us up with Him, and seated us with Him in the heavenly places in Christ Jesus, so that in the ages to come He might show the surpassing riches of His grace in kindness toward us in Christ Jesus. For by grace you have been saved through faith; and that not of yourselves, it is the gift of God; not as a result of works, so that no one may boast. (NASB)
This passage along with various others in the Bible lead us to believe that only by grace we are saved. Therefore, we are saved when we put our faith in Christ alone, realizing that it was by His blood alone that we have forgiveness of all our past, present, and future sins. This is known as being "baptized in the Holy Spirit."
However, in John 3:1-5, we see this:
Now there was a man of the Pharisees, named Nicodemus, a ruler of the Jews; this man came to Jesus by night and said to Him, “Rabbi, we know that You have come from God as a teacher; for no one can do these signs that You do unless God is with him.” Jesus answered and said to him, “Truly, truly, I say to you, unless one is born again he cannot see the kingdom of God.” Nicodemus *said to Him, “How can a man be born when he is old? He cannot enter a second time into his mother’s womb and be born, can he?” Jesus answered, “Truly, truly, I say to you, unless one is born of water and the Spirit he cannot enter into the kingdom of God. (NASB)
So in this passage, Jesus is saying that we must be "born of the spirit" (putting our faith in Jesus alone, as mentioned above) and "born of water" (physically immersed in water as a public profession of your faith)?
I believe--and have seen plenty of strong evidence that supports--that it is by your faith in Jesus alone that saves you, and therefore allows you to live eternally in Heaven when you die or the Lord comes back. However, this verse has always given me trouble with my previously stated belief, and I can't seem to mesh the two together.
So ultimately I am asking this: How do the above two verses correlate with one another in teaching, and why did Jesus say what He did in the Gospel of John if it is only by our faith in Him that allows us to enter into Heaven?