This is a village I made with a tileset I drew for my own project, The Viking & The Ninja. The tileset was drawn in Paint Shop Pro (I later changed my pixel art drawing program to Aseprite) and the level was mapped in Tiled.
The tileset has many modular tiles so you can build things with variety. For example, the same base house can be varied over and over again by changing its height and length. Trees can have some parts removed or added to change their appearances. Windows and the clothesline can be used both on the front and the sides of houses. The tileset uses two palettes with 16 colours each and two background layers.
When designing a village in an action-RPG, the layout of important places is similar to layout of real towns. Shops and meeting spots are naturally centred to minimize the traveling distance to as many villagers, and the players, as possible (1). Landmarks are placed to add recognition, in this case a fountain (2) which of course serves a gameplay point as well. Signs tell people where they are or where they are going (3). But there are differences as well. To frame something of importance and telling a story with it, it can add greatly to the experience by placing a house in the outskirts of the village (4), to give character to the person living there.