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. I found my self taking an early distribution on a 401k last year and (innocently) cashing the check. I later found out how bad of a deal that is, but I also found out about the *first time* homeowners exception to the penalty.

Actually, this is a common mistake. IRA's and 401k's differ on this issue. You can avoid the penalty on a first-time homebuyers exception only on a distribution from an IRA. The same does not hold true from a 401k.

If you want to research further, pick up form 5329 from your post office or library and read the exception list on the backside of the form.


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