The light aircraft started a fire after hitting the building in the German city of Wesel around 35 miles north of Dusseldorf on Saturday afternoon.
Witnesses told local media the plane had hit the balloon before coming down.
Firefighters and police are at the scene and the area has been cordoned off.
The aircraft was capable of carrying two people, but police said it was not yet clear how many people were on board and the dead have not yet been identified.
The child hurt in the accident is said have suffered only minor injuries.
Wesel police spokesman Peter Reuters said: “What we know so far is that at 2.40pm here in Wesel an ultralight aircraft crashed into a residential building, whose attic went up in flames.
– Deutschland: Flugzeug traf Heißluftballon vor dem Absturz und tötete drei, sagen Zeugen.