If you qualify as a "first time home buyer", the first $10,000 you withdraw can be exempt from the 10% penalty for early withdrawal. You will still pay regular income tax. Any amount more than $10,000 that you withdraw will be subject to the penalty and the income tax.
For IRS regulations, a "first time" home buyer is someone who did not own or co-own the home they lived in as their main residence at any time in the 2 year period prior to the closing on the new home.
Also, you must withdraw the money before you close, and you must close within 120 days of withdrawing the money. If you withdraw after you close, or it takes more than 120 to close after withdrawing, it won't qualify for the penalty exemption.
