With housing prices and values falling and with a record number of people out of work or underemployed there are a lot more people looking to modify their home loan or mortgage so that they can continue to pay the bills and stay in the house they have. You will most likely need to take the initiative in negotiating a home loan modification, though some banks will purposely try to work with you the minute you miss a mortgage payment.

It’s important to remember that banks that own mortgages and only make money if you they have someone in the home making regular loan payments. Banks often sell foreclosed houses for less than the value of the original loan they extended, so it’s in their best interest to work with the current owners and make modifications to home loans when possible.

Remember: banks make money on mortgage payments. Banks aren’t stupid: many would now rather modify your loan and keep you making payments you can afford rather than evict you and get stuck with an empty house that’s not bringing in any money at all for them. Home owners also benefit by modifying their home loans, even if their mortgage is underwater, because over the long term owning a home is still a better value than renting.

This doesn’t mean that modifying your home loan is going to be easy. Banks are large bureaucracies that are often mired down in their own procedures and processes. If you are having a difficult time, you might want to try to follow some basic steps to take to get a bank to modify your home loan. Remember: there are essentially four ways to modify a home loan:

Modify Your Home Loan Interest Rate: One of the most important aspects of any home loan is interest rate. The first option in any mortgage modification is usually to lower the interest rate. Interest rates of 8 or 9 percent were common five years ago, but now you can get a home loan rate of 5 or 6 percent if you can work with your bank to lower your rate. If you can change your mortgage rage to just one or two percent lower than your current rate you could save hundreds every month on a mortgage payment.

Modify Your Home Loan Terms or Number of Payments: Most home mortgages are 30 year mortgages, but some banks now offer special mortgages that are 35 or even 40 year loans. By extending the length of the home loan there are more payments, which means each payment per month is lower. Some home owners who initially signed up for bi-weekly (typically twice a month) payments sometimes want to move to monthly payments to fit a change in income levels. Modifying a home loan’s number of payments is uncommon, but still done in some cases.

Modify Home Loan Amount: Many lending institutions are so desperate to keep home owners in their homes and making payments that they are actually writing off some of the home value loss, even if the mortgage is upside down. This is called a principle reduction and though they are talked about a lot, they are relatively rare. Banks can basically reissue a mortgage to the same person for the same house, except for a lower amount to more accurately reflect the home’s value.

Modify Home Loan Type: Though often forgotten, switching your home loan from an Adjustable Rate Mortgage (ARM) to a fixed-rate loan type is another, more permanent, way of changing the interest rate. Some people who are locked into a high fixed rate mortgage are actually moving to adjustable rate mortgages because the interest rates have been remaining so low recently.

Any home loan modification has to initially be negotiated through the home owner and the bank that owns the mortgage. Some lenders are more open to modifying mortgage loans than others and each request for a loan modification is a unique situation. There are a growing number of banks who are looking to increase their mortgage business, so if your lender isn’t open to one type of home loan modification, try suggesting another.