If it will be your forever home I'd go for house 1. Even if you don't utilise the top floor now you will eventually. It has potential to turn the top floor into a den/playroom for when kids are older or a master suite, office, guest room.
Also the garage being smaller, you'll never park your car in there so chop it in half and make it a large utility room, useful to dry washing in during the wet weather too.
House 2 seems to feel bigger but the garage is a waste of space to me.
I'd always go for south facing garden, especially when you've a garden room with house 1.
What's the sq feet of each house?
If in doubt, don't!