After two weeks of delay, The Senate voted to pass a seven month extension and expansion of the tax credit for homebuyers. The legislation should reach President Obama for his signature this week.

The current homebuyer tax credit is scheduled to expire on November 30th. This new bill would extend it until April 30th of 2010. First-time buyers who are in the process of making a purchase will still qualify for the $8000 tax credit even if they close after the November 30th deadline.

The expanded tax credit will allow more people to qualify for the credit. Move-up buyers do not have to sell their current homes to qualify, but the money must be used to buy a primary residence, not a vacation home.

The new legislation included provisions to address complaints of fraud. The IRS is given greater authority to oversee the the process to root out fraud, and provisions are added in response to past abuses of false sales or underage buyers.

The new legislation should continue to fire up the housing market and continue to bring new buyers into this fast-paced market.

Congress may be closer to extending the $8000 first-time buyer tax credit, but analysts disagree over the effect the extension may have.  One analyst, Robert Stevenson, said the Senate Committee’s proposal for extending the tax credit will have a “limited impact”on home sales.

Stevenson said that the main pitfall of the proposal is that it only pushes back the expiration of the tax credit to the end of April. He is skeptical that the extension will drive homebuyer activity over the slow winter months. He does agree that Congress could come back and extend it again.

Jerry Howard, President of the National Association of Home Builders, offers a different view. He believes that “failure to act now could derail the fragile housing recovery even before it has time to take root…the consequences would be devastating for both housing and the economy.” Homebuilder stocks were up sharply in the wake of the news of the Senate comprom,ise.

The compromise on extending the tax credit doesn’t mean it’s a sure thing, and the proposal still faces a vote in Congress. One potential snag is a recent government report that uncovered fraud and abuse associated with the tax credit. Thousands of ineligible taxpayers may have received millions of dollars under the program, according to the report.

On October 30th, the Wall Street Journal reported that a Senate committee has reached a compromise on extending and expanding the $8000 tax credit for first-time buyers due to expire on November 30th.

While the compromise still must be passed by the full Senate, this agreement would extend the existing credit for first-time buyers, while offering a new credit of up to $6500 for some existing homeowners. This reduced credit would be available to all homebuyers who have been in their current residence for a consecutive five-year period in the past eight years.

Washington lawmakers also raised the qualifying income limits to $125,000 for single taxpayers and $250,000 for joint taxpayers from the current $75,000 and $150,000. Under the Senate compromise, buyers must have accepted contracts by April 30th and closed escrows by June 30th.

The new provisions are aimed at broadening availability of the credit beyond first-time buyers and giving the weakened real estate market a bigger boost while preventing real estate investors from benefitting. While Senate lawmakers appear to have reached a deal on the substance of the tax credit, they are still at odds over how it would be brought to the Senate floor. The measure still faces votes in the full Senate and House.

According to a new Zillow survey, nearly 20% of first-time home buyers say that extending the $8000 tax credit would be a primary influence on whether they would buy a home in 2010.

In the survey: “18% called the credit the primary influence in their decision; 25% said it would be a significant influence; and 27% said the credit would have some influence.”

The 18% translates to about 334,000 first-time buyers who would buy a home in 2010. The addition of that number of buyers could make the difference between a substantial increase in home sales and a flat or negative change in home sales.

The current $8000 tax credit for first-time buyers is set to expire on Nov. 30, 2009. Home buyers who do not currently own a primary residence or who have not owned one for the past three years are eligible for the credit.