You can withdraw up to $10,000 from an IRA to buy a home if you are a first-time homebuyer and be exempt from the 10% penalty. All traditional IRA withdrawals are subject to regular income tax, and any amount over $10,000 will be subject to a 10% penalty unless you are over age 59-1/2.
401(k) withdrawals are not exempt from the penalty for a first-time home purchase, but you can do a direct rollover from your 401(k) into an IRA and then withdraw the money from the IRA.
"First time homebuyer" for this rule means that you did not own the home you lived in as your main home at any time during the 2 years prior to the planned home purchase. You could even own other property, or owned your own home more than 2 years ago, you just can't have owned (or co-owned or partially owned) the place that was your main home.
You generally can't withdraw money from a 401(k) for any reason if you are still employed with the plan sponsor, unless you are over age 59-1/2. Some employers allow hardship withdrawals, but you would have to ask them what their hardship rules are and whether a home purchase would qualify.
Remember that even if you make a hardship withdrawal from a 401(k), or roll it over to an IRA and then withdraw from the IRA, you always owe regular income tax. There's no way around that. You will also owe a 10% penalty except for up to $10,000 withdrawn from an IRA if you qualify as a first-time home buyer.
If you have a Roth option account in your 401(k), you could roll it over to a Roth IRA and then withdraw up to the amount of your principal contributions tax-free, because you can always withdraw your contributions from a Roth IRA tax-free. If you withdraw Roth earnings before age 59-1/2, you will owe a 10% penalty unless you qualify for the first time homebuyer exemption on up to $10,000 of withdrawals.
