If you are younger than 59 1/2 you will pay a 10% early withdrawal penalty and ordinary income tax if you take money out of a 401k. There is no exception to the early withdrawal penalty for taking that money from a 401k. With a traditional IRA you can take out money for a down payment without the early withdrawal penalty, but the rules are different for a 401k. It is an expensive way to make your down payment.
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