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Thinking of buying your first home? You'll need to save at least as much for the down payment and closing costs. But there are also a host of things—federal and state grants, tax credits and other options—you can explore that are designed to make it easier for first-time buyers to afford their first home. In fact, even if you've owned a home in the past, you may qualify for these programs if you meet certain guidelines.

Read on for how to take advantage of such options. (For more, see: Top Homebuyer Tradeoffs.)

According to the U.S. Department of Housing and Urban Development (HUD)—the government agency for the housing—a first-time homebuyer is someone who meets any of the following conditions:

• An individual who has not owned a principal residence during the three-year period ending on the date of purchase of the property. A person's spouse is also considered a first-time homebuyer if either person meets the above criteria.
• A single parent who has only owned a home with a former spouse while married.
• A displaced homemaker who has only owned with a spouse.
• An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations.
• An individual who has only owned a property that was not in compliance with state, local or model building codes—and which cannot be brought into compliance for less than the cost of constructing a permanent structure.

As long as you qualify as a first-time homebuyer as delineated above, the following options can help make your dream of buying a new home a reality.

The first thing to understand about tax benefits is the difference between a tax deduction and a tax credit. "Many people think these terms are interchangeable," said Lisa Greene-Lewis, a certified public accountant in San Diego, Calif. "A tax deduction reduces your taxable income, but your actual tax reduction is based on your tax bracket. A tax credit is a dollar-for-dollar reduction in the taxes you owe.

That means you save a lot more with a credit. "A tax credit of $100 would reduce your tax obligation by $100, while a tax deduction of $100 would reduce your taxes by $25 if you are in the 25% tax bracket," said Greene-Lewis. (For more, see Tax Deductions Vs. Tax Credits.)

Hone in on HUD. The first place to look for grant assistance is HUD. Although HUD does not make grants directly to individuals, it does grant money to organizations that is earmarked for first-time homebuyers. The best place to start is by checking out HUD's re list.

Look to your IRA. Every first-time homebuyer is eligible to take $10,000 during their lifetime out of their traditional or Roth IRA without paying the 10% penalty for an early withdrawal. However, the federal government's definition of a first-time homebuyer is someone who hasn't owned a personal residence in three years, said Dean Ferraro, a Mission Viejo, Calif., enrolled agent authorized to represent taxpayers before the Internal Revenue Service (IRS). So even if you owned a home in the past, if you meet the federal criteria, you're eligible to tap these funds for a down payment, closing costs, etc.

If you have a traditional IRA, you will have to pay income tax on the money you withdraw. Roth IRA accounts will not be subject to additional taxes as they are funded with money that's already been taxed. Because each person has a $10,000 lifetime amount that can be withdrawn penalty-free from their IRA, a couple could withdraw a maximum of $20,000 combined to pay for their first home. Just be sure to use the money within 120 days or it does become subject to the 10% penalty, Ferraro cautioned.

Size up state programs. Many states—for example, Illinois, Ohio and Washington—offer down payment assistance for first-time homebuyers who qualify. Typically, eligibility in these programs is based on income and may also have limits on how expensive a property can be purchased. Those who qualify may be able to receive financial assistance with down payments and closing costs as well as costs to rehab or improve a property.

Know about Native American options. Native American first-time homebuyers can apply for a Section 184 loan. Next to the no-money-down VA loan, this is the best federal-subsidized loan offered, said Ferraro. This loan requires a 1.5% loan up-front guarantee fee, and only a 2.25% down payment on loans over $50,000 (for loans below that amount, it's 1.24%). Unlike a traditional loan's interest rate being based on the borrower's credit score, this loan's rate is based on the prevailing market rate.

Section 184 loans can only be used for single family homes (1-4 units) and for a primary residence.

Forget the federal tax credit. You may know someone who benefited from the federal first-time homebuyer tax credit, but it ended on July 1, 2010.

Buying a first home also makes you eligible for the tax benefits afforded to every homebuyer, whether it's their first home or not.

Home mortgage interest deduction. The IRS allows you to deduct for the interest you pay your lender, said Greene-Lewis. Home mortgage interest is one of the biggest deductions for those who itemize and can make a huge difference for filers. You should be advised of interest paid to your lender on a 1098 form sent out annually in January and/or early February.

Points or loan origination fees deduction. The fees you pay to obtain a home mortgage may be applied as a deduction, according to Greene-Lewis. Points will also be reported on Form 1098 from your lender or your settlement statement at the end of the year, she said, adding that the rules for how you deduct points are different for a first purchase or a refinancing.

Property tax deduction. Property tax deductions are available for state and local property taxes based on the value of your home. The amount that's deducted is the amount paid by the property owner, including any payments made through an escrow account at settlement or closing. You may find property taxes paid on your 1098 form from your mortgage company if your property taxes are paid through your mortgage company, said Greene-Lewis. Otherwise, you should report the amount of property taxes you paid for the year indicated on your property tax bill.

Residential energy credit. Homeowners who install solar panels, geothermal heat systems, and wind turbines—or energy efficient windows or heating and air conditioning systems—may receive a tax credit worth up to 30% of the cost. Check the IRS' energy incentive list to see if you qualify.

Once you factor in all the tax benefits and deductions you are eligible for, make sure you look for a mortgage company that best suits your needs.

Homeownership costs extend beyond down payments and monthly mortgage payments. Be sure to factor in both first-time homebuyer and other tax benefits and deductions in deciding whether you can afford to buy a home and how much you can pay for one.

"Make sure you factor in closing costs, moving costs, the home inspection, escrow fees, home insurance, property taxes, costs of repairs and maintenance, possible homeowners association fees and more, said J.D. Crowe, president of Southeast Mortgage, Georgia's largest non-bank lender, and president of the Mortgage Bankers Association of Georgia.

Knowing you truly can afford the home you choose gives you the best chance of being able to live there for years to come. (For related reading, see: Top Tips for First-Time Homebuyers.)