Financing a Short Sale with Repairs in IL

[Steve Smith]

Full disclosure I am a short sale newbie.  Situation: I found a deal in my area, far north suburbs of Chicago, and was planing to fund it via a conventional mortgage live in it for a couple of years and depending on the market either flip it, take the proceeds and do another or rent it. Well I have now come to find that it is a short sale and when I looked at the property it had a recent sump pump failure and the carpet and dry wall in the basement now have mold.  Not a big deal in my book and the conventional mortgage that I was going to use to fund the deal will not fund until remediation by the seller or bank, and we all know that will not happen. Other information: There may be more as the inspection has not yet been done, this is all that I saw. the listing agent has said he will approve holding the inspection to be done within 5 days after the bank approval.  I am aware of the extended time short sales can take, and that is not a concern for me.  

Part 1: My question to all of you is simple (I think). Is a FHA 203k loan my only option? It seems to be the only one that is being offered. I have never had one but it sounds like a big pain to deal with and I don't like not having control of my funds for my rehabs. My understanding is draws are given by the bank from escrow (that I'm still paying on) and someone else decides when it is paid out. It sounds like a bottle neck for everyone involved.

Part 2: If the 203k loan is the best option, can I only fund what I need to get into the house, in this case lets assume it is just the mold remediation, or do I need to fund the whole project this way?  The house does need updating throughout, paint, landscaping, etc but it mostly cosmetic nothing that would keep it from being lived in and things I can mostly do myself.  

Thank you for your time and expertise!  

Steve