After you have entered the Form 1099-R you will be asked as series of questions. One the questions will pertain to the exceptions to the early withdrawal penalty. Select First Home Purchase.
Note that the taxable amount of the withdrawal will still be entered as ordinary income on your tax return.
To enter, edit or delete a form 1099-R -
Click on Federal Taxes (Personal using Home and Business)
Click on Wages and Income (Personal Income using Home and Business)
Click on I'll choose what I work on (if shown)
Scroll down to Retirement Plans and Social Security
On IRA, 401(k), Pension Plan Withdrawals (1099-R), click the start or update button