My wife quit working last year to stay home with the kids full time. She won't go back to work for at least six years. We own our home and the mortgage is currently in my name only. We are looking to build a new home, and rent out this one, but would like to use her $18k 401k towards the down payment. I've read that the 10% penalty for early withdrawls can be avoided if used towards the first-time purchase of a new home. If she co-signs on this mortgage, would we able to avoid the penalty?