I have a $60,000 dollar 401k with the company I work for. Can I borrow or withdraw funds to purchase a primary owner occupied single family home without a tax penalty?

I currently own a townhouse and I'm recently married and we want a larger home. We don't want to sell the townhouse today as the value is less than the mortgage.

You may be able to borrow if your plan allows for it. When you borrow from a 401k they have to charge you interest, but that interest is paid back into your account so you are paying it to yourself.

If you withdraw (and that may also not be allowed) you will pay a 10% penalty and the amount would be added to your taxable income for the year.