My mother keeps hallucinating and thinks her dreams are real. She sees people in her house everyday. She thinks they are trying to hurt her.

Get her checked for a UTI.

Does she take Ambien at night to sleep? It can cause intense and unsettling hallucinations.

Is she on meds for the depression? It’s possible they could be making her delusional. Search this site for signs of dementia. If she’s showing symptoms, call her PCP and tell him or her what’s going on. You could also ask for a referral to a neurologist.