I recommend La Chimenea Hostel in Banos, Ambato. It is affordable whether you want to rent a bed in the dorm or a lovely private room on the floors above. Our room had balcony, hot water, a double and single bed.
Prices start at $8, breakfast not included. There is a rooftop common room for all to enjoy the waterfall and springs nearby.
The family who manages Chimenea are helpful and knowledgeable about tours in the area. A short block or two to the thermal baths.