Ok to make this simple here are a few key details and I would really appreciate some input.

I'm 23, my husband is 29. Married. (Btw sorry for the number-dump...I've never bought a house before and people are so damn finicky about talking numbers and I have nobody to really talk about this stuff with,)

We both have 750+credit scores. We can afford rent of~ 1200 a month and still pay all of our bills, so that's the price we could pay approximately for a mortgage, with some wiggle room.

I have 25k vested in my 401k and will be starting a new job early next year. It's a large pay raise.

My question is: is it a bad idea to withdraw my 401k early to try to make a down payment on a house? I'm 23 yrs old. The new job will be good paying and I could easily start over my retirement plan.(I know I'll face the 10% penalty). I have 8k of my own money saved. So I'll have about 28k total. I dont wanna drop it all on a house tho. Only about 20k and leave 5-8k as a rainy day fund.

If I used that 401k money to put down 20k on a house(200k is my comfortable budget, i could choose a house that's around the 150-170k range and overbid to try to get someone to accept my offer). All my mortgage estimates say I can afford closer to 250-275k but I'm ok with staying cheaper and doing some mild fixer uppers.

Idk if I should do FHA, USDA, or try a conventional loan (yay PMI🙄), but I would really appreciate some advice...I'm so sick of seeing rental prices that would surpass a mortgage price. I'm torn on what to do. also, does anyone know if early 401k withdrawl affects credit score?