Some people use their 401K money for a down payment. Normally, when someone takes money out of their 401K, the government imposes a 10% penalty for early withdrawal. However, when it's used by a first-time homebuyer as a down payment, the government does not penalize the borrower for this transaction. This is one of the exceptions.

The advantages: You can get the loan quickly, usually within a week or so of applying to your company. You don't have to qualify for the loan through a credit approval process because, after all, you're borrowing your own money. The interest rate is quite low, usually at prime rate or slightly over prime, so you would pay about 5% - 6% today. The interest that you do pay is actually paid back to you and your account. You generally have 5 years to pay it back and usually 10 years if you use it for the down payment on a house. You avoid any 10% early withdrawal penalties and income taxes that would hit you if you took money out of the 401(k). However, you may want to think twice before raiding your nest egg to feather your nest. Here's why:

1. Borrowing from your 401(k) plan will slow its growth. When you withdraw the loan money, it reduces the amount that you have invested. Let's say your 401(k) funds have been invested in the stock market, earning double-digit returns. Once you borrow the funds, you lose that double-digit growth. If you repay the loan with interest at 9 percent, but your investments had been earning 18 percent, you cut your investment growth in half.

2. You may be tempted to reduce your monthly 401(k) contributions by the amount of your loan repayment to keep your paycheck stable. That's a mistake: your retirement assets will stagnate while your taxes balloon. Contributions to your 401(k) are tax-deductible. Your loan repayments are not, so expect the taxes deducted from your paycheck to increase.