What draws people to live in a location? What features do ancient civilizations look for in locations to build a village?
Actually they will look for a place where they can live well. In particular, the following questions will arise:
Can you survive there?
This is the first and most fundamental question. If you have no chance to survive at that place, there's no point to settle there. In particular, you'll need water to drink, and either arable land (or, if you are herdsmen, pastures) with enough water for producing food, or a way to make sure that you will always buy whatever you need (for example, being on a trade route at the only place where a big river can be crossed so you can demand tolls, or having valuable resources nearby that you can sell for food).
Can you actually build homes there?
That is, do you have some space where you can build homes (in whatever technique the culture knows or is able/willing to use), as well as the materials/tools needed? Note that in ancient times, unless you were filthy rich, you couldn't afford to carry building materials from far away.
Can the place secured?
You'll not live long at a place if you cannot defend it against dangers, which may be either natural dangers or other people, sometimes both. Early settlements were usually close to rivers, but seldom directly at rivers, because of the danger that the rivers flood the settlements. Also places where you can overview the surroundings well allow you to spot approaching enemies early. And a place which is naturally hard to reach may be of advantage (but then, if you're dependent on trade, being hard to reach is a bad idea).
Of course the importance of this point depends very much on the actual danger at that time. For example, in times when warriors come from the sea, you may prefer to settle away from the sea so the warriors have a harder time to reach you (and especially cannot attack you from the ships), while in times where the main danger comes from the land, you'd actually prefer living at the sea which protects one side of your settlement from the land attackers (in addition to the advantages of sea access to food production and trade).
How far is the next settlement?
If you want to do any trade, you want to have trade partners nearby. Also, if some foreign power attacks, it may be of advantage if there are several settlements which can combine forces for defence. Also, there might be some fortification where you can get protection in times of danger.
Are there hostile people around?
The last thing you want is to be surrounded by people who would do everything to get rid of you (unless you're there to evangelise; in that case you may actually seek such places, as long as they are not too dangerous). Reasons why this would happen are many. One major reason would be a different religion, but that's certainly not the only possibility.
How do your people like that place?
Assuming they have the choice, people will not settle at a place which is not of their liking. This of course depends very much on the culture. For example, for a culture where wine plays a major role, the availability of hills appropriate for growing wine will possibly be important, while a culture that cares more for beer will prefer fields where they can grow hop. Also the climate of the place enters here; people will not settle at places with bad climate unless they have no choice (or all their other choices are even worse).
Any culture looks for access to water, food, and building materials for shelter and tools when evaluating a location. Depending on how advanced the culture is, they may also look for trade routes or access to the sea. Access to a specific resource such as copper ore may also influence their decision.
It could also just be because their leader said "This is far enough. Here we will build." without regard to how well that location would actually do as a location to live.