I retired from a company at age 55. I left my all the funds accumulated in that 401k after retirement, the account is still active although I have not deposited finds since. I now work for another company and plan to buy a house. My understanding is I can withdraw penalty free (paying applicable taxes) since the fund is with the original employer I retired from. Is this correct?

Yes, you are correct. If you are "separated from service" from the company where your 401(k) resides in the year you turn 55 or later, then indeed you can make withdrawals from that plan without the 10% early withdrawal penalty. This is one of the advantages of 401(k) plans over a traditional IRA. It does not matter that you are now employed elsewhere.