You nahve a few options . 1) I would try a rapid rescore which can pull your score up and get approved for a loan now. I use this process all the time to help my clients. My wife Ellen is a loan officer with FBC Home Loans and can d o this for you at no charge. 2) Some lenders will require a 10-20% down with a score below 580 but is a case by case basis. 3) you are wise to ahve saved the money in a 401K. I would look at other options before using this money . Now is a good time to be in the market so you would ahte to pull it out unless it was your only option. Email me firstname.lastname@example.org and i would be glad to help you find a home and get approved for the loan.