Chris, the Rural Housing Direct Loan program is the best kept secret in Verona! I am actually in the middle of a transaction involving a Rural Direct Loan program and done a lot of research regarding the qualifications.
To your question, basically everything south of Cross Country Road in Verona is eligible including the new homes south of the beltline.
As far as their definition of "modest", it is anything equal or less than the loan maximum for Dane County which is $225,000 the last time I checked. They will loan to both new and existing homes.
There are a few other great options with USDA that I can share with you.
All of Oregon, Cottage Grove, Cross Plains, and Waunakee are covered as well.
Madison Pro Realty
"home of the $1,000 signing bonus"