Yes, USDA home loans can be used to purchase foreclosed homes, short sales, homes sold by real estate agencies, and homes sold directly by the owner.
You should be eligible to purchase a foreclosed home with your own USDA loan as long as the property is USDA-eligible. The other option is to purchase a foreclosed home that was originally financed with a USDA loan—even if the USDA boundaries have changed, the property will still be grandfathered in, since the original financing was started with a USDA loan. Take a look at these properties for sale by the U.S. federal government. These houses are for sale to anyone, but you will still partner with a broker or real estate agency to make an offer and purchase the home.