Backpackers paradise, great to relax, lots of pasteries and pizza :) We stayed in La Liberdad Hostel ($US6/dorm and $US10-14/room) with kitchen, free wi-fi, 4 computers, free salsa classes, hammocks, close to central park. Spend some time looking for a hostel, there're plenty of them. In the "tourists street" you find great food a bit expensive but worth it, also cocktail discounts like buy one get one for C40. Nice places to visit out the town: Laguna de Apoyo (Tour or on your own), Masaya Market and inside the town: Granada Beach, Pinatas Taller, Old Train Station, Tour to the volcano, Tour to the coffee plantation, Free Cacao Museum with All you can Eat Breakfast ($US7). Rent a bike and cycle around, bring a lot of water and snacks.
Mountain Area, very beautiful. We stayed in Hotelito El Economico C150 - Nice, clean, free wifi, TV in the living room and cool staff. Go to tourism Info Office situated in Museo del Cafe and ask what to do, you have so many options. On weekends everything is closed though. We been and enjoyed: Museo del Cafe (free), reserva natural cerro apante (C30), Hotel de Montañas e Cabañas Selva Negra (C50), Mirador Disparate de Potter; In the North of Matagalpa (we found it poorest) is located the Guanuca Cultural Center which is Movie Night on Fridays and Cultural Night on Saturdays (free entrance); You have this "Matagalpa Tours" store where you can find local crafts selling, spanish school, tours to the coffee plantation ($US15) where you know the producters culture, daily life and productive activities - pretty interesting! You also have the chance of homestays.