Can someone explain to me what happens when you walk away from a house in MN?
Basically, we bought a house 3 years ago and we're already underwater. There are a lot of structural problems popping up with this house that were neither disclosed to us or noticed in the home inspection. To top it off, our basement has flooded 3 times in the past year due to the torrential storms we keep getting (south metro area, near Northfield). My wife and I are at our wit's end to figure out what to do. The previous owners did all the work themselves, including adding a second-floor addition and attached garage, and they did about 80% of the work WRONG. There's bowing of beams that aren't supported properly, improper weather sealing that's created water damage, cheap windows, lack of insulation, suspicious wiring, suspicious plumbing, you name it. I could throw $25,000 at this house and still not get it up to where it needs to be for me and my family to feel secure in it, but I could empty my savings and still not come close to that amount.
My wife and I have seriously sat down and discussed just walking away, credit scores be damned. We have a 2-yr old daughter, and we need to do what's best for her in the long run. With all the water infiltration and moisture issues, I'm constantly terrified of mold growth.
My concern at this point is, would the bank be able to take us to court to force us to pay the difference between what we owe and what the house is worth? We have an FHA mortgage, not an 80/20, and we're probably a good $50,000 or so underwater if you take into account all the repairs that need to be done. Also, if we just walked away, would there be tax penalties of some kind as well?
Has anyone here gone through a foreclosure (not a short sale) who can answer my questions? Thank you so much for any advice!
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Response to NickB79 (Original post)