The shot was fired about 12.30am, the bullet piercing the glass of the Clematis Cres home at Barrack Heights, ending up lodged in the wall opposite.

The mother of five boys, who asked not to be identified, said her two eldest sons - aged seven and five - shared the room, although they were not in their beds at the time.

"I had the kids with me in the lounge room. It was just so cold for them that night and we were all snuggled together to keep warm," she said.

The 28-year-old said she heard a loud "bang" but believed a car had backfired so did not check the house.

It was not until she woke in the morning that she discovered the hole in the window and curtain.

"It scared the life out of me, especially to think what could have happened," she said.

"My kids could have been in the room. I could have been checking on them - the bullet hit at chest height."

She said the report of the gun woke the neighbours, although no-one saw the alleged crime take place.

The woman said she did not know why the incident happened and believed it might be related to thug activity in the area.

"I haven't done anything to harm anyone and it terrifies me to think we have been targeted," she said.

"I just want people to know there's a person out there using a gun.

"I also want the person or people who did this to know they are cowards for shooting at a house full of little kids."

Lake Illawarra Inspector Mark Robinson, who attended the scene with detectives, confirmed police were investigating the fire of a projectile into the home.

He asked that anyone who may have witnessed the incident or had information, to contact Crime Stoppers on 1800 333 000 or Lake Illawarra detectives on 4295 2655.