So long as your booking is on a single ticket, your baggage will go through all the way to Munich.
Istanbul's airport is pretty great, and I've been drawn in by Turkish Airline's prices in the past as well! A couple years ago they had extremely attractive pricing in business class from the US to Prague, via Istanbul (and one of the good things about Turkish Airlines' business class is they have a full business class cabin with bigger seats and much more legroom, like you'd find on domestic first in the US and quite nicer than many of the economy-with-middle-seat-blocked-off on other European carriers for intra-Europe business).
Turkish Airlines knows they're a bit out of the way for many people coming from North America and traveling to other parts of Europe, so the airport is really configured well for those kinds of passengers. They also have some very useful information here:
https://www.turkishairlines.com/en-int/any-questions/transfer-transit-passengers/