Yes, option 3 is the correct option in your scenario. Since the HELOCs were used the buy, build or improve the home that secures the loan, it is home acquisition debt not mixed-use. As you mention you then have options to figure your average balance.
The method you suggest (main and HELOC 1 for beginning balance plus main and HELOC 2 for ending balance) will work great. Your qualified loan limit is $750K so divide that by your average balance to get the percentage of deductible interest.
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