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John Said:

Approved with FHA Home loan but they require payment protection?

We Answered:

First things first. If you are buying from your mother at $90,000 and the house is worth $160,000 you should be doing this as a gift of equity purchase. This way you will not need the 3.5% down payment.
As far as the mortgage insurance, this is an FHA requirement no matter how much equity you have. The only time you do not have monthly mortgage insurance on an FHA loan is if you do a 15 year fixed at a loan to value of 89.99% or less. Feel free to contact me through my profile if you need more info or help.