Should we buy his brother's house rather than be a co-signer?

My husband's brother is separating from his girlfriend, and needs to refinance the mortgage to get it in his name only. I'm assuming that this also to take her name off the title. The problem is he does not qualify for the refinance alone. I'm not sure if it was because of credit or declared income. He does make enough to pay the mortgage and has done so for the past 5 years. She never contributed. I think he would like us to co-sign the loan, but I know that this would make us entirely liable for the home. I don't think I want to put my credit, and financial future in his hands. Besides, by co-signing the loan we are saying that we can afford to make those mortgage payments ourselves. If this is the case, why shouldn't we just buy the house outright, and then he can pay us rent. Would it be better to buy it outright and rent it to him, or co-sign with the understand that if he defaults then we gain entire possession of the house so that we can sell it to pay the debt?