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The exception to the 10% early withdrawal penalty for a first time home purchase is only if the funds were distributed from an IRA, not a 401(k).
IRS website for IRA exceptions - https://www.irs.gov/taxtopics/tc557
IRS website for non IRA exceptions - https://www.irs.gov/taxtopics/tc558
No. You are not exempt from the 10% early withdrawal penalty when you take money out of a 401k. That only works for a traditional IRA. When you take money out of a 401k for a down payment you are subject to not only the ordinary income tax but the 10% early withdrawal penalty. You misunderstood the rules.
Sorry. Even though they have a similar purpose, IRAs and 401(k) are controlled by different tax laws and follow different rules. The homebuyer exception does not apply to a 401(k).
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