A fire in their Southeast apartment house last November burned a path for Diane Smith and her four children to a two-story detached home in a quiet, clean Northeast residential neighborhood.

A clerk typist who earns $8,400 a year, Smith knows she is lucky. The 30-year-old single parent works for a Southeast Washington agency that tries to find new homes for hundreds of displaced low-income families.

In November, she became one of her own clients competing for a scarce commodity in the city -- a clean, low-cost home. Her employer, Far East Community Services Inc., tried to help with no success.

Real estate agents and apartment managers laughed when she told them she could only afford $250 for a three-bedroom apartment or hung up when she told them she had four children.

A Washington Post newspaper article that recounted her energetic but disappointing two-month search for a new home brought a telephone call from the owner of a Channing Street house that Smith is now renting.

It ended two months of scanning newspaper ads and searching fruitlessly for a new place she could afford.

Last week her family, friends and co-workers gathered to attend mass in her new three-bedroom home. Smith and her children, proud of the work they've done to the house, gave thanks for their good luck and prayed for those still homeless.

The second floor has been painted, the bathroom has been redecorated in blue and white tile and wallpaper, and the kitchen walls now boast bright tawny-colored wallpaper.

For the 40-minute service, conducted in the living room by Father Joseph Del Vecchio, some of her guests sat on the yellow kitchen and orange dining room chairs she had upholstered.

Smith stood on her new orange carpeted steps, dressed in a peach and beige floral dress she had made (as she does most of her clothes), surrounded by her two daughters and two sons who range in age from 9 to 14.

"I wanted to thank people for being so kind and this was my way of showing my appreciation and thanking God for this blessing," she said happily, looking around her new home. Her guests were helping themselves to the buffet served after the service that included barbecued chicken, shrimp and macaroni salads and coconut and chocolate cakes.

After the fire, she and her children were forced to double up and with Smith's parents and brother in a two-bedroom Southeast house. She and her two daughters slept in the basement on a hideaway bed, and her two sons shared their uncle's bedroom.

She had longed to get her children out of the Southeast apartment house where they witnessed drug deals and gambling. There, she feared for the safety of her two daughters who were alone between the time they came home from school and the time Smith returned from her job.

"I was really impressed with the house when I saw it," she recalled. "I couldn't believe it. I moved in the next day. It's quiet, very reserved, but people are very friendly," she said.

Now she's negotiating with her new landlady on the rent and has verbal assurance from city housing officials that they will grant her the small subsidy she will probably need.

"It's a dream come true," she said. But she has another dream -- that one day she can buy her own home.