401k Withdrawal for a house?

You would do well to consult a Certified Financial Planner. A sit-down with a professional who can put actual dollars amounts against your options might be an eye opener.

If your 401K is like mine, it is just now beginning to recover. My property is down about 20% from 2 years ago and holding steady. (Good thing I didn't retire and sell my house last summer.) The typical rate of growth in a 401K has your money doubling in value every 7 years due to compounding interest. So, if you work another 28 years, the $10,000 you take out now will be $160,000 you don't have down the road. Property values are more dependent on local economies, but also trend upwards over time. Both stocks and real estate have been and will continue to be good long term investments. Which is better? Good question.

My gut instincts would be to leave your 401K alone (or throw more money at it to reap the gains in it's recovery) and seek other means to finance your down payment. It's a buyers market out there, just read the fine print. Better yet, get professional advice.