I think we forgot to do favored class. In Pathfinder, favored class works differently than earlier versions.

At level 1, you choose your favored class. This must be a base class (that is, not a prestige class). It can be a class you have, or a class you don't have.

Every time you gain a level in your favored class, you gain a favored class bonus. In a 20 level campaign, this adds up to be a pretty real bonus- in a 6 level game, it is less impactful, though I may assign a few more instances of favored class bonuses.

The base Pathfinder choices are:

(1) +1 hit point
(2) +1 skill point

There are various extensions that are specific to race and class, and I don't really want to use them in this game. The extensions mostly encourage playing a certain race by class combination to get a different experience than on previous playthroughs, but it can be rough to leave min/max on the side for some of them. After all, it only takes one too-good thing to make all the others feel like the knock-off.

Should this be applied at level 1, or only 2 and on?

I want to say that it's negligible, but it would be an 8% increase in hit points right now.

Level 1 and up. It's a step of character generation we skipped strictly through my own mistake, so we'll simply un-skip it. Record your favored class and apply it at level 1. In your case, you would pick paladin, and then have one extra hitpoint (or optionally one extra skill point, but that's a rare choice). So by the time everyone is 6th level, they will have 6 extra hit points or some set of skill and hit points from favored class bonus that totals 6.