'I want to save my house'

“I will do my best until I can’t send any more payments. I’m going to try and hold on. I want to save my house,” he said.

Like others who got into homes with easy financing as the housing market boomed, Sandoval and his wife, Monica Gonzalez, stretched their budget too far. Now, they are locked into a risky loan and their mortgage is mounting.

Three years ago, the appeal of buying their first home in northwest Santa Rosa was strong. Their two-bedroom apartment of six years was cramped with two sons, and their youngest suffered from asthma Gonzalez blamed on increasingly moldy living conditions.

They had saved money for a fixer-upper and knew money would be tight with a $2,500 monthly mortgage payment — more than twice their rent.

Still, they took the plunge. The couple paid $435,000 for the three-bedroom home in June 2004, taking out two loans to finance the entire purchase.

“We liked the neighborhood,” Gonzalez said.

Once in the home, they spent $10,000 to improve both bathrooms, replace doors, paint the inside and replace a deck.

Two years later, their monthly payment set to jump to $3,800, the couple needed to refinance. But interest rates had risen and there was not enough equity in the home to refinance into a single, longer-term loan with a lower rate.

They said their mortgage broker recommended a loan that featured monthly payment choices, ranging from a minimum amount to a full principal and interest payment.

The couple mostly makes the interest-only payment of $2,800 on the two loans. When money is tight, they pay the minimum amount of $1,200, with the difference between the two added to the mortgage balance.

“If someone would have told us this could happen, maybe we don’t buy the house,” Gonzalez said.

The couple’s lender, Investors Trust Mortgage, fully discloses loan terms and payments to borrowers, said C. Edward Ratliff, president of the Santa Rosa company.

The payment option loan included more information than the couple’s initial mortgage, he said. The monthly billing statement explains interest rate changes and showed the principal balance rising, he said.

“With up front disclosures and even more detailed loan documents supplied by the lender at the signing, a borrower is given many chances to see and acknowledge the costs of their loan,” Ratliff said in a statement.

To make the mortgage payment, Sandoval took a second job in 2006 as a gas station attendant, boosting his annual income to $44,000. Monday through Friday, he works days in customer service at Prestige Imports. Wednesdays through Saturdays, he works an overnight shift at a Shell station.

“I try to save some money. It’s hard,” he said.

Stretching the monthly budget means cutting back to pay light and phone bills and doctors costs.

“We are cutting down on groceries and going out. We’re going to cut on Christmas gifts. We used to have parties for birthdays. This time, just a cake and a small present,” Gonzalez said.

The couple knew payments could eventually increase on their adjustable mortgages. But they have been surprised by the amounts and don’t understand all the complexities of the loans.

Their original loan featured a fixed payment for two years before adjusting. Such loans carried lower initial rates compared with fixed mortgages, keeping payments more affordable for a certain period. Buyers counted on property values rising so they could refinance into longer-term loans.

“They said after two years you will refinance and the payment is going to come down. They said that because I’m going to have more equity in my house and I said OK,” Sandoval recalled of his discussions with the mortgage broker.

But Sandoval was not in such a favorable position when he needed to refinance a year ago. Home values were falling and interest rates had climbed.

Ratliff acknowledged that many homeowners were caught in a similar predicament.

“The results are both tragic and painful, but the resulting tightness in the lending industry has eliminated the chances of many of these people from refinancing the loans they have,” he said.

The couple managed to refinance by taking out a riskier loan that offers different payment options, including an interest-only choice they can usually afford. But the payments have been rising, $100 every six months.

“I thought it was good. Now I see this sucks,” Sandoval said. “It’s more expensive. When I send just the minimum payment, the rest goes to my mortgage, so you’re going to owe more money to them.

“Now we’re in a really black hole and I don’t see the end.”