Brenda, most lenders will be looking at the sales price to evaluate placing PMI on your loan. But, a local bank (I happen to do business with one in your area) may underwrite according to the appraisal value if the property is in their "footprint". Otherwise, Sam's response is straight on.
Yes, on a purchase the loan to value is based on the purchase price not the appraised value. If you decide to refinance after then it could be waived if the loan amount was 80% or less than the appraised value. But on a puchase you will have PMI unless you put 20% down based on the purchase price amount. Sounds like you found a great deal though, good luck!