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but suffice it to say, loan modifications are not pipe dreams. They are real and they can make a substantial difference in your monthly budget.

Now, as we've mentioned, a loan modification changes a term, or terms, of your existing loan. The most common terms that might be able to be changed through a loan modification are:

* Lowering the interest rate.
* Extending the loan payback period (say from 25 years back to 30)

* Skipping some payments (usually these are appended to the back end of the loan, so the skipped payments become the last payments you make)
* Forgiving some principle (this is more common in homes which have depreciated, resulting in the borrower owing more than the home's fair market value)

Again, the purpose of changing these loan terms is to reduce your monthly payment to something you can afford. Now let's discuss why a lender would even consider modifying your loan.

Loan Modifications: The Why
Imagine you are a lender and that you let someone borrow money from you so they could buy a house. You and the borrower agreed to some terms for payback of the borrowed money, with one of those terms being that interest would be charged and the borrower would pay some interest with every payment they make.

This is a great way for you, as a lender, to make money without working. However, let's say the borrower stops making payments and the housing market crashes, so they can't sell the house to get out of the loan.

Do you want the house for yourself so that you can struggle to sell it or do you want to at least make some, or most, of your money back? Clearly you want to make your money back, rather than ending up having to take the house back and then sell it at a very discounted price.

This is why banks are interested in loan modifications. If they can change the terms of the loan sufficiently that you can afford to keep paying them for many years into the future, they will be happy. They make much better money off a mortgage that is being paid back than they do off a home that they have to go through the trouble of having to repossess.

At this point, it should be clear why a lender would be interested in negotiating your loan and changing some of the terms. The next issue is how to go about getting a loan modification.

Loan Modification: The How
In order to get a loan modification, you have two options: do it yourself or get somebody else to do it for you.

Do it Yourself
To get the loan modification ball rolling, you simply need to contact your lender and ask about

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