In addition to mortgage insurance, you want to avoid gift taxes, which must be paid on gifts from a single donor in excess of $11,000 per recipient per year. The best approach is going to depend on your family situation, which you didn't tell me.
If you are married and have at least one child, the best approach is to incorporate a "gift of equity" of $50,000 in the sales agreement. Lenders will generally accept this as the equivalent of a cash down payment, provided that they are satisfied that the house is really worth $200,000. They probably will require two appraisals rather than the customary one because the sale price was set within the family rather than through arms-length bargaining.
If you are married with one child, your parents can each give you and your wife $11,000, and one of them can give your child $6,000. These five non-taxable gifts add to a total gift of $50,000.
If you are married but have no children, your parents can only gift you and your wife $44,000 tax-free, and you will be subject to a gift tax on $6,000. You can avoid this by having your parents make cash gifts of $44,000 before this year is over, and another gift of $6,000 after the new year. When you settle on the house, the $50,000 cash down payment would go back to your parents. Obviously your parents have to be able to find $50,000 in cash for this to work.
If you are single, the maximum tax-free gift from your parents, over 2 years, is $44,000. You could reduce their gift to that amount and take a loan of $156,000 rather than $150,000, which would still avoid mortgage insurance.
The alternative is to have your parents take back a second mortgage for $50,000 and then gift you the amount of the mortgage payments each year so that there would be no outlays on your part. The down side of this approach is that your house would be 100% encumbered -- the first mortgage and second mortgage would add to 100% of the property value. First mortgage lenders view this as a negative and would charge you a higher rate which might cost you as much or more than mortgage insurance.
