。
She lives in a big house.
Literal
She [topic-は] big house [in-に] is-living.
住んでいる is the resultative ~ている of 住む ('to live, to reside') — a habitual/ongoing state of residence. Without ~ている, 住む is a momentary verb of moving in. The location of living takes に (not で) — に for static existence/residence, で for activity. Contrast: 大きな家に住んでいる ('lives in a big house') vs 大きな家で勉強する ('studies in a big house').