You can withdraw up to $10,000 from an IRA if you are a qualified first-time home buyer, and be exempted from the 10% early withdrawal penalty. You would still have to pay regular income tax. This means that you need to move up to $10,000 from the 401k to an IRA, this is called a rollover. (Open a new IRA, rollover the money, then withdraw it.). If you withdraw directly from the 401k, you do not qualify for the penalty exception. If you withdraw more than $10,000 from an IRA, you will still pay the 10% penalty on everything over $10,000, plus regular income tax on the entire amount.
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-exceptions-to-tax-o...
"First time" home buyer for this rule means that you, and your spouse if married, did not own any home you lived in as your main residence for at least 2 years prior to closing on the present home. (Amusingly, this means you could own other property or a vacation home, you just can't have owned your main residence.)
