My husband and I have negative equity in our house and we have tried to sell it 3 times. We have it back on the market, but the agent tells us that we need to take a short sale in order to break even on the sale of our house. The mortgage company will not take a short sale. We have already purchased another home and cannot afford both payments. What will happen if we let our old house go into foreclosure?

Foreclosure can ruin your credit rating. Sounds to me like the best solution is to back out of the "new" house and keep what you have until you can sell it for a profit.

Sounds like its too late to follow 450's advice since you already own the new house. If the foreclosure does not satisfy the old mortgage after the auction the bank will come to you for the difference.

Have you tried calling them mortgage company and working out a repayment plan. Often times if you are behind at least one payment sometimes the mortgage company will work out some type of payment arrangement and make the payments more easy to handle. Then you can possibly rent the house out for the amount of the new payment.