K.N.
I had 3 kids in a 2 bedroom, not much of a difference. Get creative, give the kids the bedroom and you can do a futon in the living room. It allows for the kids to go to bed early and have a door shut ect.
in my place the living room was large, so I placed the couch in the middle of the room. this turned one half into the living room and then behind the couch was the play area for the kids. Kept me from tripping over toys ect all day.
It's not a great idea long term but it can be done and can be comfortable for awhile with your kids being so little. Good luck saving up for that house!