The lesson in this epistle is that, rather than ruining your credit and along with it your future prospects by letting a house go back to the lender, consider a number of alternatives:
Sell it for whatever you can get so long as the buyer takes you off the loan you signed either by refinancing or by assuming your loan and getting a signed debt relief letter from the lender. No matter what your equity, there will be very little left at foreclosure sale, and at least you will be able to walk away with your head held high.
If your own home has a significantly lower payment, MOVE into the home you can’t sell and refinance it for lower payments as a homeowner, then lease/Option or rent out your old house for money to help make your payments. This won’t make your family happy campers, but it is a solution.
If you don’t want to rent your old house, sell it on a contract with seller financing that wraps around the existing loan. As a rule, you can get a higher price and more cash flow than you would waiting for a cash buyer, and you’ll be able to get immediate payment relief while still being able to use part of the payments to offset the payments on the big house.
One more thing. When your family moves up, you get better schools and a better environment; and once they settle in, less hassel. Somehow, the negative cash flow that could ruin you in a house you were speculating on simply becomes a factor of your lifestyle; and doesn’t seem to hurt as much. Most importantly, you will have taken steps to solve your problem with double payments and possible financial ruin at some point in the future. Think about it.