President Barack Obama signed a bill Nov. 6 that extends the $8,000 first-time homebuyer credit until June 30, and makes some current homeowners eligible for $6,500 on a new home purchase.

By Lisa Scherzer of SmartMoney

Via: Samrtmoney.com

On the fence about buying a new home? Some government aid is on the way to help spur sales.

Nov. 6 President Barack Obama signed a bill that extends the $8,000 first-time homebuyer credit and expands it to include some existing homeowners.

Under the expanded program, homeowners are eligible for a tax credit of up to $6,500 if they purchase a new home. To qualify, current owners will need to have lived in their prior residence for five consecutive years out of the past eight years. The credit would apply to home purchases under contract by April 30, 2010, as long as they close by June 30.

First-time buyers (and those who haven’t owned a home in the last three years) continue to be eligible for up to $8,000.

As for income limits, the new credit is available to individuals earning up to $125,000 or couples earning $250,000. That’s up from $75,000 and $150,000, respectively, for the current tax credit. The credit can be used only on homes that cost $800,000 or less, and cannot be applied to vacation or second homes.

Here’s what you need to know:

Attention sellers: More buyers expected

The new tax credit — coupled with low mortgage rates and the supply of affordably priced homes on the market — may give many people who had been ambivalent of buying that extra nudge to step into the market. And in contrast to the credit, the new $6,500 credit is available to a larger part of the population with higher incomes.

This is “a gift of $6,500” that could help cover closing costs or renovations, says JP Endres-Fein, a real-estate broker and partner at Homes of Westchester in New York. “Over the next couple of months I suspect we’ll get a lot more people — who were in no hurry to buy before — to make a move a little earlier,” she says.

Plan out your timing now

The legislation allows buyers to claim the credit if the home purchase is under contract by the end of April and closes by the end of June. That might sound like a long time, but not in the world of home buying, says Tara-Nicholle Nelson, owner of Re-Think Real Estate. “I would tell them they should be shopping now,” she says.

If you qualify and want to take advantage of the tax credit, to be on the safe side, consider from now until March your window to buy a house, says Endres-Fein. Keep in mind that once you have an accepted offer, the closing process can take a while and can also be delayed for any number of reasons.

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