An comprehensive explanation of NPC housing: https://terraria.gamepedia.com/House

Long story short, you can make a house out of absolutely anything, provided the background wall is player-crafted. As long as it fits the size and composition requirements, anything goes. To my knowledge, the only backwall that's purchased or player-crafted that DOESN'T work is Sails from the pirate.


If you're asking about mud background walls, though, then no. You can't actually collect mud walls, and you can't craft them either. There's a number of muddy-looking walls you can use, but actual mud walls only occur naturally. For the Truffle, I usually use Mushroom Walls + Mud Blocks + mushroom furniture. I find that usually looks better than using Glowing Mushrooms as the wall blocks, plus you get extra mushrooms growing indoors in the empty floor tiles.