The loan agent came back and said that there is no time limit of getting out of PMI, you can request cancellation at 80% or it will be automatically when the balance reaches 78% of the home’s original value. If this is the case, is Option 2 better?

These are the two FAQs about the loan #2:

When can I cancel MI?
When the balance on your mortgage reaches 80% of the home’s original value or current
appraised value, you may request cancellation of your MI. You must have a good payment history
with respect to the mortgage, mortgage payments must be current and there can be no other
loans against the home. Some lenders also require verification that the property did not decrease
in value.

Will it get cancelled automatically?
When the mortgage balance reaches 78% of the home’s original value
and payments are current, the lender is required to cancel the mortgage insurance automatically.