Brad Ireland, whose former wife and two children were among the dead, identified the shooter as 44-year-old Alan Smith.
Smith's parents, who were also killed, had asked him to move out, but he returned on Sunday and opened fire, Ireland said.
The victims represented four generations of the blended family, ranging from a great-grandmother in her 90s who used a wheelchair to a seven-year-old girl, according to Jennifer Mercer, a neighbour and family friend who set up an online fundraiser to help cover funeral costs and other expenses, and was authorised to release these details.
Police said they responded to the home on Sunday evening and heard gunshots coming from out the back, just before the house was completely engulfed in flames.
Investigators confirmed on Tuesday there were eight victims, including four children, and the suspect had suffered a self-inflicted gunshot wound and later died.
The investigation has been complicated by concerns about the structural integrity of the house after the fire burned it to its foundation, said Jeff Stovall, a spokesperson for the Billings Police Department.
Efforts to fight the fire were delayed until the site was secure, allowing the blaze to tear through the home.
Among those killed were Ireland's ex-wife, Megan Ghekiere, and their two children, Owen Ireland, 13, and Chloe Ireland, seven.
Also killed were Ghekiere's two stepchildren with her second husband: Landon Ghekiere, 15, and Charlotte Ghekiere, 12.
"The one thing we do know is that Charlotte was the hero," Mercer said.
"Charlotte called 911 and she tried to save her family. And that's something the family does want out there."
She described the family as "very loving and close" and said the children all got along and that their parents remained amicable even after divorcing.
"I feel like our entire community is devastated, even people that never knew any of them," Mercer said.
The Smith family was originally from the Seattle area. Ireland said that after he and Megan Ghekiere divorced six years ago, she moved to Montana with their children. That's where she met the man who would become her second husband, who was not at the home when the shooting occurred.
Her parents, Dana and Barb Smith, soon followed, buying a house in Billings near their daughter's home. Evelyn Smith, Dana's elderly mother, lived in a nearby retirement community, Ireland said.
Alan Smith moved in with his parents in Montana and stayed with them for years before being asked to move out a couple weeks ago, Ireland said.
He unexpectedly returned to the home on Sunday evening, when the Smiths had gathered for a weekly family dinner.
Ireland said Alan Smith killed his grandmother, his parents, his younger sister and the four children before setting the house on fire. He tried to flee before being confronted by law enforcement, he said.
"There were many red flags and many people spoke out," said Ireland.
"No one listened."
Alan Smith was a "hermit" who spent most of his days in his room on his computer, Ireland said.
The Montana shooting is the deadliest in the US since April, when a Louisiana father fatally shot eight children, including seven of his own, and shot and wounded his wife and another woman.
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