Renting would still be less than our current mortgage. Part of the problem is that our home has lost over 60% of its value (over 100k) and it will never recover because of location and high unemployment in the area so realistically we would have to live there for the next 20 years before we could sell it at what it is worth which is not feasible with work, life and having a family. We have had a difficult year health and work wise unfortunately which is part of it as well and it's sad that I actually have to state that here. But I'm just a self entitled gen-yer and I guess expect everything to be handed to me.
The problem with your plan is that you have decided to give up on the existing house, let someone else pay for your mistake, and now plan to jump right back into a risky situation. Bichon pointed that out but it's just not what you want to hear.
So let's review: You bought a house that is now underwater. You want to sell it and realize the loss because of your prediction that it will recover its value in 20 years. You also say that health and job issues are part of the decision.
After selling the house and allowing the bank's shareholders to pay for your inconvenience, you want to buy another house to fix up. Do you think that fixing up a house will be less taxing on your health, family, and job demands than staying in one that has simply lost value on paper? Do you actually believe that you will not be spending way more on the new mortgage PLUS the renovation costs (materials).
I hope you don't think this post is rude as well. You are making a bad decision. Bichon pointed that out to you. I did not find his message rude. But even if it was, his information and assessment of the situation seems pretty accurate.
If you want suggestions regarding what is the smart thing to do financially then listen to what you are being told. If you are looking for validation for something you have already decided then you'll need to provide a much more compelling story than you have. Because I think you should skip the sale and put your effort into making the most of your current situation.