ARE THERE PENALTIES IF i WITHDREW 401K FUNDS FOR MY NEW HOME?

Yes, there will be a 10% early distribution penalty on the gross amount withdrawn if you are under the age of 59 1/2 or under the age of 55 and separated from the employer who provided the 401(k) account.

If you are under age 59-1/2, you will pay a 10% penalty, plus regular income tax.  

You can withdraw up to $10,000 from an IRA for a "first time" home purchase and not pay the penalty, although you still pay regular income tax.  If you do a partial rollover from your 401(k) to an IRA first, then withdraw it from the IRA, you can use this exception, but not if you withdraw directly from the 401(k).