I thought if I made a withdraw from my 401k and used the money for a down payment on my new home. Then there wouldn't be a penalty.

[Lisa995 · Accepted solution]

Ohhh, no, that only applies to IRA distributions, not 401K distributions. 

If you had rolled your 401k into an IRA, then took the money from the IRA, you could get exception to the penalty on the first $10,000.