401(k) Withdrawal for first property/ Tax Withholding

[Christina Marie Carnuccio]

I planned to use my 401(k) to invest in my first rental property with my husband. I no longer work and I thought it would not have any penalties since I was not employed. Turned out not to be the case because after going under contract and starting the mortgage financing I read the small print in my distribution form of the 401(k) that a mandatory 20% tax withholding will apply. If that is the case then I would not have enough for the down payment. Does anyone have any experience or understanding of this? I emailed my accountant and plan administrator but probably won't hear back until Monday. 

I also read that I could rollover to an IRA and withdrawal without penalty but not sure how long the process would take.