Homebuyers who have not owned a home in 2 years can use $10,000 of their 401K for a Down Payment without PENALTY, but they still have to pay the deferred income taxes against that money. A better plan for those intent on tapping into a 401K is to borrow from it. They pay the interest back to themselves, and there are no taxes to pay.
Homebuyers can, however, draw from an IRA for a Down Payment without taxes or penalties.
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