First, take the red felt and cut out the shape as shown in the illustrator to make the top of the house and fold the felt into a cone shape and sew or glue it together.
Cut out white felt circles and sew them onto the red roof. Use the white felt again to cut out a rectangular shape and fold it into a cylindrical shape and sew it.
For the underside of the toadstool, roof cut out a red circle and sew or glue it onto the white cylinder stem. Flip the stem upside down to make the sewing easier.
Attach the red roof to the red circle underside of the toadstool. You could sew the two red edges together or use a hot glue gun. I added a bit of stuffing in the roof to make it look full before the roof was secured on.
To make it look better to add a door. Sew on a brown piece and a black circle for the door handle. Now the fairy toadstool house is ready!