As expected, President Obama signed into law the bill that extends the first time homebuyer credit of $8,000; it also raises the income limits for qualification. But this bill also includes a $6,500 tax credit for existing homeowners who want to move up (or down) provided they’ve lived in their home for 5 of the last 8 years.

Details:

• Must be in escrow no later than April 30 and close escrow no later than June 30.
• For first time buyers, max. income limits have been raised to $125k for singles and $225k for a married couple.
• If you close escrow in 2010, you can claim the credit on your 2009 taxes (verify this with your tax counsel…!).

Comments – when the first $7,500 tax credit was enacted (not a true credit, but a loan that needed to get paid back to the Feds), then the “real” $8,000 credit, policy makers hoped it would not only spur the first time buyer buying that first home, but that a ripple effect would occur. The seller of that first home would move up, that seller would move up, and so forth.

It didn’t happen. Most first time buyers have been buying distressed homes (ie, short sales and bank foreclosures).

With the new $6,500 credit, policy makers now hope to kick into gear that move up crowd.