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There are allowances for first time home buyers which can avoid penalties if it applies in your case.

Only if the money is rolled over to an IRA from the 401(k) before being completely withdrawn. The first time homebuyer exception for early withdrawal penalties does not apply to 401(k)s.

Additionally, the penalty exceptions for IRAs only apply to $10k of the withdrawal subject to penalty - so if there is a penalty for early withdrawal, it likely would not be completely avoided - only partially avoided.

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