The Democratic Party has captured the House of Representatives and is two extremely close races away from winning control of the U.S. Senate, as well.

In Virginia, incumbent Republican Sen. George Allen was trailing Democratic challenger Jim Webb by only about 7,800 votes out of the more than 2.3 million cast, with indications the final outcome might not be known for days, and could lead to legal challenges.

Republican and Democrat party officials dispatched lawyers to Virginia to observe the continuing tally Wednesday morning of uncounted absentee ballots, as well as canvass votes counted on Election Day.

“I know the counting will continue through the night, it will continue tomorrow,” Allen told supporters last night.

The too-close-to-call race didn’t deter Webb, who bounded on stage just after 1 a.m. ET to thank his supporters for a hard-fought victory.

“The votes are in and we won,” Webb told a crowd of jubilant supporters at a northern Virginia hotel ballroom. “This is a great moment for all of us who believe in an inclusive society …I will look forward to representing all of you to the best of my ability.”

Allen’s campaign had no comment, and FOX News, along with other major news outlets considered the race a virtual dead heat.

In Montana, Republican incumbent Sen. Conrad Burns was waiting to hear whether he survived a tougher than expected battle with Democratic challenger Jon Tester.

Burns’ staff told FOX News that vote-counting computers in GOP-heavy Flathead County failed and the ballots will be counted by hand beginning Wednesday morning, a process that could take all night. Election officials in Yellowstone County, Mont., also said voting machine problems there will delay reporting of any votes until after at least 7 a.m. ET Wednesday.

Virginia and Montana aside, Democrats succeeded in shifting four Senate seats to their side of the aisle.

In Missouri, Democrat Claire McCaskill had to wait until after 1 a.m. ET to claim victory in a close race against incumbent Republican Jim Talent.

“All of our efforts fell a little bit short this time, but they were worth the making,” said Talent, who was embroiled in a bitter debate about a proposed state amendment backing embryonic stem cell research.

Elsewhere, Republican Bob Corker defeated Democratic Rep. Harold Ford Jr., in the race for the Tennessee Senate seat being vacated by outgoing Senate Majority Leader Bill Frist.

In Pennsylvania, incumbent Republican Rick Santorum lost his seat to challenger Bob Casey. Republicans also lost a Senate seat in Ohio, when incumbent Sen. Mike DeWine was beaten by Democratic Rep. Sherrod Brown.

In Rhode Island, longtime Republican Sen. Lincoln Chafee lost to Democratic challenger Sheldon Whitehouse.

Dems: America Wants ‘Change’

Democrats, meanwhile, celebrated Tuesday night after capturing the House of Representatives in convincing fashion.

Democrats needed to swing 15 seats to take control, but by the end of the day they had won 26 seats.

Three GOP incumbents lost in Indiana, three more in Pennsylvania, two in New Hampshire, one in North Carolina, one in Kansas, one in California and more elsewhere. Democrats won open seats, which were held by Republicans, in New York, Ohio, Florida, Arizona, Colorado, Wisconsin, Iowa and Texas.

“It’s a great night for Democrats, it’s a great night for America,” Sen. Charles Schumer, head of the Democratic Senatorial Campaign Committee, told supporters at the Hyatt in Washington around midnight as Democrats celebrated their wins. “We will tell you and all of America, not only can we do better, but we will do better.”

President Bush, meanwhile, scheduled a 1 p.m. ET Wednesday press conference to discuss the election results. The White House said Bush would place morning phone calls to Rep. Nancy Pelosi, the current House minority leader who is poised to be the new majority leader. Bush also is expected to call other Democratic winners, including Connecticut Sen. Joe Lieberman, who ran as an Independent and defeated Democrat Ned Lamont.

Rahm Emanuel, D-Ill., head of the Democratic Congressional Campaign Committee, pledged that Democrats would reach across the “partisan divide” and set aside the “bitterness of the last few years,” adding that his party would extend the hand of cooperation to the Bush White House.

“You have given us a chance to turn this country around and we’ll give you a government that no longer lets you down,” Emanuel told supporters.

House Democratic Leader Nancy Pelosi of California is set to become the first female speaker of the House. Her deputy Rep. Steny Hoyer of Maryland announced he will run for the majority leader post, the second in command in the House.

Current Majority Leader John Boehner congratulated the Democrats for their hard-fought victory.

“We are deeply disappointed in the outcome, but as Republicans we must recommit ourselves to the principles that brought us to the majority and renew our drive for smaller, more efficient, more accountable government,” said Boehner, R-Ohio.

White House spokesman Tony Snow said Bush is “obviously disappointed” that the House changed hands, but pointed out that the president believes “the challenges haven’t changed. Democrats have the responsibility to help the president win the war, and to keep the economy growing.”

But Republicans are considering whether changes have to occur in the GOP House leadership. That could mean Boehner, current House Speaker Dennis Hastert and others will be challenged for primacy in the party.

In the Senate, meanwhile, speculation grew regarding Lieberman’s loyalty in spite of the long-time Democrats declaration Monday to FOX News that if elected as an Independent he would caucus with Democrats.

“Dear friends, this year’s campaign, to say the obvious, was a long journey on which you — my dear supporters — and I were tested as never before but we never wavered in our beliefs or in our purpose, did we? And we never gave up, did we?” Lieberman asked supporters Tuesday night, thanking the labor groups and firefighters who made up a large portion of his base.

“And tonight, tonight, thanks to the voters of Connecticut, our journey has ended in victory and hope and the opportunity to make a difference for six more years,” added Lieberman, who was shunned by fellow Democrats, including New York Sen. Hillary Clinton, a potential 2008 presidential contender.

In Maryland, Democratic Rep. Ben Cardin held off Republican Lt. Gov. Michael Steele for the seat vacated by retiring Sen. Paul Sarbanes. The race was called early for Cardin, but Steele refused to concede in spite of trailing by more than 152,000 votes.

One Steele campaign official told supporters to go home because they are not sure about the results.

“We do not believe we can calculate who won the race,” the official said, adding that 200,000 absentee votes won’t be counted until Thursday. “So, go home. We’re going to pray.”

In New Jersey, Democratic incumbent Sen. Bob Menendez beat Republican state Sen. Tom Kean Jr., son of the popular former governor and Sept. 11 commission chairman who shares his name.

Rep. Bernie Sanders easily captured the Senate seat in Vermont to keep it independent after the retirement of Sen. James Jeffords. Sens. Robert Byrd of West Virginia and Ted Kennedy of Massachusetts both went on to win record-breaking ninth terms.

FOX projections also showed incumbent Democratic Sen. Bill Nelson handily warding off a challenge by Republican Rep. Katherine Harris. Her House seat stayed in GOP hands, going to businessman Vern Buchanan.

Governor’s Races

As of 5 a.m. EST, six gubernatorial turnovers had occurred in Arkansas, Colorado, New York, Ohio, Maryland and Massachusetts. That means Democrats would control the top elected office in at least 28 states, the biggest turnover in state leadership in 12 years.

New York went Democrat as voters chose to send Attorney General Eliot Spitzer to Albany to take the place of outgoing GOP Gov. George Pataki.

Click here to read more on the governors’ races

In Ohio, U.S. Rep. Ted Strickland defeated Republican Secretary of State Ken Blackwell to put a Democratic governor in office there for the first time in 16 years.

Baltimore Mayor Martin O’Malley, a Democrat, beat Gov. Robert Ehrlich, who had a tough fight battling against voter displeasure with the war in Iraq and his ties to President Bush.

And Democrat Deval Patrick became the first black governor of Massachusetts, receiving support from moderates who kept Republicans in the governor’s office for the past 16 years. He is the second African American ever elected governor.

In Colorado, Democrat Bill Ritter defeated GOP Rep. Bob Beauprez for the seat left open by term-limited GOP Gov. Bill Owens. Arkansas chose Democrat Mike Beebe over Republican Asa Hutchinson.

Charlie Crist kept the Florida governorship now held by the president’s brother, Jeb, in GOP hands.

In New Hampshire, Democratic Gov. John Lynch easily won a second term over Republican state Rep. Jim Coburn, while Democratic Gov. Phil Bredesen also won a second term by defeating little-known Republican challenger Jim Bryson. Other gubernatorial winners were Republicans Arnold Schwarzenegger in California, Jodi Rell in Connecticut, Sonny Perdue in Georgia and Democrat Edward Rendell in Pennsylvania.

Celebrations and ‘Steep’ Mountains

McCaskill in Missouri told FOX News that despite all the attention the stem-cell issue received during the campaign, “it was one issue in the campaign.”

“I think the national media, candidly, made it the only issue,” but it was also about Iraq, health care, oil prices and prescription drugs, among other things, she continued.

McCaskill also was asked about whether it was helpful to her that actor Michael J. Fox — who has Parkinson’s disease — publicly endorsed her with commercials praising her support for embryonic stem-cell research.

“I’m very grateful to Michael J. Fox because he is brave and committed and the commercial was powerful,” she said, but added that she actually credited conservative radio host Rush Limbaugh’s comments about how Fox may have been exaggerating his symptoms for the commercial, saying that helped her raise “a lot of money.”

Meanwhile, the crowd at GOP headquarters in Indianapolis welcomed re-elected Sen. Richard Lugar with applause and held up Lugar 2006 signs soon after his win. Gov. Mitch Daniels, a former Lugar aide and campaign manager, wore a Lugar campaign button from 1976, when he was first elected to the Senate after a 1974 loss to Democrat Birch Bayh, father of Indiana’s other senator, Evan Bayh.

“This is a celebration tonight for Indiana,” Lugar said.

In Pennsylvania, Santorum conceded just after 10 p.m. and called Casey to offer his congratulations.

A strong conservative, Santorum said he had no regrets about any of his stances on the War on Terror, or other issues.

“To all of you out here and the tens of thousands of volunteers “¦ we appreciate everything you have done and sacrificed for us … This just was just a little too steep a mountain to climb,” he said, flanked by his wife and children.

“It’s now going to be a great opportunity for me to do more about what I write about and talk about all the time, and that is to be a better father and husband to this wonderful family.”

In Rhode Island, Whitehouse told supporters who voted for him, “I will work my heart out to honor your trust.”

He also thanked Chafee, who he said “very graciously conceded the race,” and thanked the Chafee family for its “long and distinguished legacy of public service.”

Voters on Iraq, Corruption and Bush

As the final hours of Campaign 2006 wound down, the big question was how voter discontent would translate into control of Congress in the last two years of President Bush’s administration.

Bush flew to his home state of Texas to vote, finishing a restrained five-day campaign swing in mostly GOP strongholds. But he was heading to bed with the Senate still hanging in the balance early Wednesday morning.

Just after leaving the White House Tuesday night, Snow pointed out that a number of so-called Blue Dog (conservative) Democrats were elected, saying that provides some “interesting opportunities.” Snow said Bush will continue to push for “comprehensive immigration reform,” among other issues.

Bush made one phone call on Election Night, and that was to Rep. Tom Reynolds, R-N.Y., to congratulate him on his re-election. Snow said the president will make the “rest of the calls” Wednesday morning, including a call to Pelosi.

FOX News exit polls of five key states — Arizona, Maryland, Ohio, Rhode Island and Virginia — released at 6 p.m. ET Tuesday, gave an early indication of voter sentiment.

Those polls of about 12,000 voters indicated 41 percent who cast their ballots approved of Bush’s job performance, while 58 percent disapproved.

Of the 37 percent in the survey who said the war in Iraq was an extremely important issue in how they voted, 61 percent indicated they voted Democrat, while 37 percent said they voted for the Republican.

Meanwhile, of the 42 percent of those polled who said corruption and scandal in government was extremely important in their vote, 61 percent said they voted for the Democrat, while 36 percent went Republican.

One of the big questions in this campaign is whether it turns out to be a referendum on national issues or hundreds of separate races on local issues.

Thirty-three percent of voters said local matters counted most, while 62 percent focused on national affairs, according to the exit polls.

Spending by the two national parties surged in the final week as Democrats and Republicans invested in television commercials designed to sway the outcome in more than 60 House races and 10 Senate contests. In all, the two parties have spent about $225 million thus far in campaign activities independent of the candidates themselves.