To get started with your village, you'll need to build 3 things: A Town Hall, a Builder's Hut, and a Citizen's Hut. To craft your Town Hall Chest, you'll need paper and wood. The recipe is seen at the right.
You'll also need to craft a Citizen's hut, so that settlers can become villagers, and can then take up worker positions, such as the builder, which will be the final piece necessary to start your village. These, and all other buildings, have to be within 100 blocks of the town hall
And finally, you'll need to craft a Builder's Hut, where your Builder can start construction on your buildings.
Once all of these buildings are crafted and places, all you have to do is wait for settlers to come around, become villagers, one of them to become a builder, and you're all set to start building your village.
to task the builder to build or upgrade the house, go into the chest and click the information button and click build house(even if you are upgrading the house).
do quests for the villagers to make them very happy, and if they are very happy, depending on their house level, they will turn into a higher person(lv2=citizen, lv3=noble,lv4=aristocrat).