As an FHA Fee Inspector I can offer a little insight into the 203k loan. This is a great program but has limitations and rules you must follow. This program does not work for folks who want extra money and have dad and uncle Joe fix the place up.
FIrst, you need an approved contractor. The contractor must be familiar with the program and maintain certain insurance policies such as general liability and workers' comp. You can act as a contractor but must purchase these insurance policies. All sub-contractors must be licensed if necessary. Plumbers, electricians and furnace/air-conditioner techs must be licensed in Illinois.
As for the money, the contractor will itemize the cost of repairs and once the repairs are made the contractor will request the money from the lender. The lender will release funds after there is proof the reparis meet FHA criteria. For big jobs Draw Inspections (periodic payments from the lender) may be required, it depends on the lender. To ensure the repairs meet FHA criteria an FHA Fee Inspector will inspect the work, at your expense, and submit paperwork and photos to the lender. For large jobs that require Draw Inspections you may need more than one inspection.