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Can you withdraw money from your 401k to use it to complete the downpayment of your first home without being penalized?

No. Depending on your employer's plan, you might be able to get a hardship withdrawal from your 401k, but you'd still owe taxes and probably a penalty [hardship withdrawals, except for medical-expense-related ones, are not generally exempt from the 10% penalty tax].

You can borrow from your 401k plan without a direct penalty (although there are risks associated with a 401k loan...).

I heard that you can do that with your IRA account. Is this correct or I have to show proof that I am in financial hardship?

Yes you can withdraw from your IRA account and no, you don't have to prove hardship beyond the fact that you meet the IRS criterion as a first-time homebuyer. I believe the limit is $10K, lifetime.

Also can I have an IRA account and at the same time a 401k through my job?

You may have both an IRA and a 401k (I do). The only issue is whether the IRA contributions are deductible or not.

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