If something is in your imagination or we refer to imagination, it is not real or actual and when we speak about 'fancy' it could mean that something is high class or that you like something specific, so if we "fancy" something we like it, and are find of it. Happy learning 😀🌺

Imagination can only be a noun. In the US, fancy is mostly just used as an adjective meaning "decorative" or "intricate." In British English, it can also be a verb meaning "want" or "desire" or "imagine", or a noun that means "what you want."