If you take money out of a 401k you will get a 1099R for next year and have to enter it as income on your next tax return. There is no tax break for using money from a 401k for the purchase or down payment on a home. Money you take out of a 401k is taxable income.
You must be confused by the rule that pertains to the SALE of a house----if you SELL a primary residence you have lived in for 2 out of the last 5 years, you do not pay capital gains on $250K if you are single, or on $500K if you are filing a joint return.
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