<prompt> Human: Im 28 years old and looking to buy a house. Is it smart to take 5,000 out of my 401k to use as a down payment?  <response>: It is not correct that the withdrawal from the 401 k plan will be exempt from the 10 early withdrawal penalty. That is true only for IRAs, and only if it is a first-time homebuyer purchase.Wait and save the extra 5,000.If your 401 k plan allows an in-service direct rollover to an IRA highly unlikely, you could do a direct rollover to an IRA and then withdraw the money penalty free. However, it will not be tax free. 