Under the laws of all states in this country, the trustee under an employee 401 k account cannot invest such money in investments that are not approved by the United States Department of Labor. From what you have written and based upon my experience the purchase of the home may not comply with 401 k investing requirements.Typically employees get to designate how their money is invested such a money market accounts and the like. From what you have written, a possible complaint against the employer with the Department of Labor nearest you may be warranted as well as meeting with an attorney that practices in the area of investment law.