401(k) Withdrawal for first property/ Tax Withholding

[Account Closed]

I planned to use my 401(k) to invest in my first rental property with my husband. I no longer work and I thought it would not have any penalties since I was not employed. Turned out not to be the case because after going under contract and starting the mortgage financing I read the small print in my distribution form of the 401(k) that a mandatory 20% tax withholding will apply. If that is the case then I would not have enough for the down payment. Does anyone have any experience or understanding of this? I emailed my accountant and plan administrator but probably won't hear back until Monday. 

I also read that I could rollover to an IRA and withdrawal without penalty but not sure how long the process would take.

[David Wilkinson]

Regarding rolling to an IRA, reach out directly to your 401(k) provider. Oftentimes, it can be done in a matter of days if you are rolling to an IRA at the same brokerage firm, but if depends on your plan documents and what they require.
If you roll to an IRA, you'll still need to pay taxes (and an early withdrawal penalty if you are younger than 59.5 years old) when you file next year (or when you pay quarterly taxes), but you generally aren't required to withhold at the time of the IRA withdrawal.