IF YOU WANTED to stretch things a bit to make a good story, you could say that David and Carol Ann Shapiro bought Prospect House, one of the grandest houses in Washington, for $5,000 down.

Today the 200-year-old historic house is worth somewhere between $1.5 million and $2 million. The mansion is one of 14 on this year's Georgetown House Tour, next Saturday and Sunday. Several years ago, it was the National Symphony's Decorator Showhouse. And before that, it was the President's Guest House, host to the shah of Iran, among others.

Of course, the Shapiros really didn't just pay $5,000 down. "We've put every penny we had-and more-into our houses," admitted Carol Ann Shapiro, while dispensing third helpings of her excellent chicken salad. "But we did start out with $5,000, my husband's legal fee from a landmark case between the unscheduled airlines and the trains. He'd expected to get $3 million-he was less than 29 then-but the decision was reversed."

(David Shaprio, a lawyer who has appeared in many famous cases, including a number of civil-rights suits, is now a partner with Dickstein, Shapiro and Morin. He once was a partner with Charles Colson of Watergate fame. Carol Ann Shapiro was once a model, now works with Planned Parenthood and moonlights giving glittering parties.)

Shapiro, a tall, good-looking woman with red hair, talks at a breathless pace, but the story goes sort of like this. First, 20 years ago in May, they rented a three-bedroom house across from the zoo for $190 a month. Then they had their fourth child, who had to sleep on the dining-room table in a basket because there was no other room.

So they bought a $45,000 house in Chevy Chase. They had $5,000, a friend lent them another $5,000, and the seller took back a second mortgage for $5,000. Several years and a good bit of work later they sold that house for $85,000 and bought a house in Potomac for $75,000, added a dining room, finished the basement and sold it for somewhere around $200,000. That money bought them Sen. Stuart Symington's handsome house in Georgetown. After five years and a considerable amount of fixing up, two years ago they sold that one for $450,000 to the first people who looked at it.

"They asked if the draperies and bedspread and the trees in the tubs outside of the house were included, and I said, "'Yes,'" Shapiro said. "So they said, 'it's just what we wanted.'"

The Shapiros were concerned at that point because they'd had no reply to their offer on Prospect House. The owner then was traveling in Eastern Europe. So the Shapiros were really playing Russian roulette by selling their house before they had what might be called a good prospect. Finally, the contract on Prospect House was signed-at $435,000.

"Of course, that was just the beginning," said Shapiro. "We had noticed there were electric heaters here and there, so we should have inquired more closely about the furnace, but we didn't. We found it wasn't working at all. Then the ceiling of the living room, and the bedrooms above it, fell in. We had to do the floors over, replacing some beams. And of course, all electricity, plumbing and heating, and seven completely new baths.

"We could have stopped at several places. But it seemed a shame not to do it all right."

Doing it right included more than the seven baths and the basic utilities. All the walls, except for those in the living and dining rooms, have been wallpapered (even the ones that look like paint). Most rooms, including the baths, now are hung with chandeliers (some left over from previous houses). A pool house and sauna are now ensconced below the famous Prospect gazebo. New boxwood, azaleas and trees now bloom in the garden. At last a proper brick wall stands between the garden and the street. And a handsome William Moeller-built pool now stretches along the lower terrace, surrounded by splendid stone terracing by John Pagliaro.

The Shapiros bought the house at the end of June 1977. The workmen moved in "and haven't left yet," Shapiro said. They weren't able to move in until September. She figures the remodeling at about $400,000 over the purchase price. "My husband says we won't be able to afford to live here," she said, "when it's all done."

For 200 years, Prospect House, with a prim, upright air, has stood at the top of the Georgetown Bluff. Up and down the river are the views that gave it its name. Then, the estate went all the way to the Potomac. The Shapiros have heard from several old Georgetowners that a dark tunnel began just south of the Gazebo and went all the way to the river. The tunnel had arm irons in the wall to serve a shameful trade. The Shapiros think it has been filled in.

Gen. James Maccubbin Lingan, a Revolutionary War patriot, built the house about 1788. In 1793, Lingan sold the house to John Templeman of Boston, who likely entertained President Adams in the house when he came to inspect the Federal City in 1800. (In 1812 Lingan was stoned to death by an angry mob in Baltimore who didn't like an anti-War of 1812 editorial in his newspaper, The Federal Republican.) Templeman was the volunteer superintendent on the construction of the George Town Bridge over the Potomac, according to a newspaper of the day. Mary Steele Morris, who lived in the house from the 1880s to 1930, was an ardent spiritualist, according to "Georgetown Architecture, Northwest," a Historic Buildings Survey book issued by the Fine Arts Commission.

Her nephew took over the house in 1934 and restored it with the help of architect James W. Adams. Morris had left the house to the Spiritualist Church, but her nephew said once (according to a book by Edgar Maclay), "The ghost, if there is one, is my aunt. This was her home for many years. She has my permission to make a return visit any time she pleases." The Shapiros haven't seen anything of Morris, but Carol Ann Shapiro said she sleeps soundly.

Prospect House has always echoed its times. James Forrestal lived here when he was the nation's first defense secretary. From here, in 1949, he went to his sad suicide at Bethesda Hospital. His wife leased the house to the State Department, reportedly for a bargain $12,000 a year as the President's Guest House. (The Trumans then were living in Blair House, during the renovation of the White House.) One of its most famous guests was the shah of Iran.

The Washington Times-Herald accused Dean Acheson of giving parties at Prospect House "to soften up Congress . . . The gatherings had a faint resemblance to stag entertainments 'for men only,' featuring liquor and feminine companionship as well as honeyed words from back-slapping diplomats."

The house, according to Shapiro, was built in three sections. First came the stern Federal front, about 1788. Probably at that time, the winter kitchen was on the lower floor, where the library is now. A dumbwaiter connects the two floors. About 1818, the owners added the dining-room wing.

The gazebo was built in 1861. Some think the gazebo or lookout spot may well have been the old summer kitchen, or built on its foundations. About 100 years ago, the new kitchen wing, with servants quarters above the what is now garage below, was added. About 1890, the whole house received a heavy helping of Victorian gingerbread with frosting. The fanciful New Orleans-style grill on the dining room veranda is all that remains of the Naughty Nineties. The excellent east bay in the living room was added in the 1930s when the house was restored.

Sadly, before the Shapiros bought the house, the owner sold off the small gate-house at the bottom of the hill and three lots. New houses on the lots are high enough that they block some of Prospect House's fabled view.

"But we can still see the Virginia commuters on the bridge from our bedroom," said Shapiro. "The gazebo still commands its prospect. And the far end of the garden and the kitchen wing all still keep their views."

Shapiro had help on the architectural changes from Bernado Rostad. The decoration she did herself.

The result might be called formal traditional comfort. "I don't do anything very innovative," said Shapiro. "We like it this way." The whole house follows, appropriately, a red, white and blue color pattern.

You walk into a narrow front hall, set to the side of the original house. To the east is the living room with its 16-foot-high ceilings. Originally it was two rooms. Matching Adam fireplaces stand on either side of a glorious east bay window, just right for their ebonized grand piano. An immense oriental rug stretches the length of the 20-by-40-foot room. A Reginald Pollack painting hangs over one fireplace. Several other paintings are by Baltimore artist Gladys Goldstein.

The fine Waterford chandelier in the living room once was in the dining room. It and the chandelier in the dining room had been used for candles and were thick with wax. The Shapiros had them wired for electricity, neater if not so romantic.

To get to the dining room, you go through a small hall, probably once the family's carriage entrance. From there, it's a few steps up to the arched entrance to the long dining room, a true banqueting hall. For less formal occasions, the Shapiros redid the kitchen and a back hall to make a spacious kitchen and a pleasant breakfast room. A door at the end of the dining room leads to the captain's walk and the gazebo with its pleasant prospect. The Shapiros at the moment have it full of plants, but when it's finished, they'll use it as a summer house.

Under the dining room is a library with French doors to the garden and to the sauna and bath house under the gazebo. To the west of the formal gardens is a pleasant kitchen garden, a private walled place, just right for solitary communion with the radishes.

The rest of the lower floor, most of it above ground, thanks to the slope, is an apartment rented by Richard Beman and Robert Daniels. Daniels helps with the garden weekends and evenings. The Shapiros also are fortunate enough to have Juan Parra, a Chilean who has worked with them for years as butler and houseman. He has the apartment over the kitchen. "The house is really easy to maintain," Shapiro said.

The three Shapiro sons are Tony, James and Miles. Tony is at Colgate University, the other two at Yale. Daughter Claudia has her own apartment and a job with CBS. But Shapiro has redone the five or so bedrooms in case they come to call. On the seccond floor is also a comfortable study. And the master bedroom is immense, almost as big as the dining room, with the aforementioned view of the Potomac. All the bedrooms, to Shapiro's taste, are covered in wallpaper with matching draperies. Olivia Kloman made needlepoint pillows to match the patterns. The baths as well have big-scale wallpaper.

So how do you pay for it all? Well, Carol Shapiro has figured out one way. The house was rented for a day to a movie company filming "Raise the Titantic." The mansion starred as an admiral's house. CAPTION: Picture 1, the 200-year-old Prospect House and its formal gardens; below right, Carol Shapiro sitting in her living room; Picture 3, the dining room. Photos by Harry Naltchayan-The Washington Post.