Creative Financing help

[Chris Mackinlay]

Greetings!

I have spoken with a lender who says it is possible to use 401k money to fund a home purchase. 

Spoke to my 401k custodian and they weren't sure of the exact details of doing that. I'll need to look at all the fine print.

This would be for an out of state purchase. 

The question: Does anyone know off-hand if I would be penalized for liquidating my 401k for the purpose of a home purchase? I assume there would be tax implications for doing this. I could increase my withholding a bit to compensate and I THINK I can spread earnings out over 3 years.

-or-

Could I do the same thing but with my ROTH IRA and only pay taxes on the increase in the value of my securities?

Thank you for any/all help!