Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything that is not clear.
As you have correctly determined, you have qualified to make a hardship withdrawal from your 401-K for the purchase of your home.
However, although that is permitted, since you are under 59 1/2, you would be subject to the 10% early withdrawal penalty.
Now you understand that the penalty applies to the hardship withdrawal, but if you were able to borrow the money from your 401-K plan, there would be no tax & no penalty. Of course the loan would have to be paid back.
Here's a link to an excellent article which explains this & other ramifications to Hardship Withdrawals:
I understand that as I already have a loan through Merill Lynch, but even If I waited , Paid it off, & re did a loan from them it would max out @ 50 k. I am looking or needing at least 70 k to keep my payment low enough to afford all loans, the length of time to pay loan back to them is short as well.
I understand. Unfortunately, you will be subject to both the early withdrawal penalty and the income tax on the withdrawal.
Thats what I need to know, Thanks.