Be careful to allow room in your budget for insulating the space and providing for additional heating and cooling. You also need to make sure to put an underflooring layer over the concrete slab. Even people who insulate forget that the concrete slab directly on the ground is a huge temperature suck and will keep that space uncomfortably cool even if you insulate the walls. Also since this room is not on the central air system, you need to provide additional heating and cooling that meets the space requirement. I've also seen people use window A/C units that were rated for about 200 sq foot for a 400-500 sq foot room. And you need a lot of heating to heat such a space. If you don't do such a conversion right, it will not be a comfortable space to use and you won't want to use it. Worse, buyers will not want it and it will significantly devalue the house.

In my last home, the previous owners had done this and done it right. They raised the floor with wood underflooring so that the floor wasn't cold. They insulated the walls. They added baseboard heaters and window A/C's that were rated for the space. And it was a reasonable addition. It was a selling point because that plus a family room addition changed a small 3-BR to a mid-sized 4BR. It encouraged me to buy it and it encouraged the family of four that I sold to to buy it (they needed that extra room for their teenaged son).

phase 1 bro. phase 2 is to build a new garage next to the existing garage/future living space, so the end result is sort-of like the top house in this photo (except our existing garage is bigger so the area between the main "house" and the garage would be longer):

http://houseplansandmore.com/homeplans/colonial_house_plans.aspx

I would never buy your house at re-sale time! No garage is a deal-breaker for us.

my garage gets the best natural light in the house, and we could use a bigger family room and a nicer master bedroom. So I was thinking of converting the garage to living space, and then changing the roof above the garage (to raise the roof slope essentially), add dormers, and expand the master bedroom into the space above the garage that is now the attic. The garage I guess is about 400 square feet, so the area above it would be a little less considering the slope of the roof and the dormers. Any ballpark estimate?