Hardship Withdrawal vs. Loan for First Time Home buyers

[Pammie57]

Two participants in the same plan are getting married and plan to purchase their first home.  Their plan allows for participant loans.  They want to take hardships to use as a down payment on their new home.

Do they have to take loans first?   I am thinking that most lenders won't take a downpayment of borrowed money.  Is there a way around the taking the loan first requirement for this situation?

Thanks!

[Belgarath]

Take a look at 1/401(k)-1(d)(3)(iv)(D). this may help you out. Essentially, a loan doesn't have to be taken first if the loan increases the need.