can you build house underground for terraria npcs?

Answer 1

You can build a house anywhere in terraria, the underground, the sky, even hell if you feel like it.

If you're making a house for an NPC house if must require:

1. Chair
2. Table
3. Door
4. Background wall
5. Surrounding wall
6. Source of light (ie torch)

For spawning (yourself) it needs:

1. Surrounding Wall
2. Background wall
3. Bed
4. Source of light (ie torch)

 

Be careful if you create a house where there are burrowing monsters; they can still burrow through your house and hurt you (they won't destory your house, respectively).