Free spells gained when going up a level must be taken from the Core Rulebook.

Other spells must be purchased (or obtained via 'adventuring') before they can be learnt. The cost of these spells is higher than normal due to their rarity.

This doesn't mean that all such spells are available (especially for non-Paizo sources).

As for Arcane spells, Divine spells can only be selected from the Core Rulebook unless the character has had a chance to study them first. Temples, NPCs or scrolls are possible sources. Temples and NPCs will generally charge for access to these spells.

Once studied, such a spell can be selected normally.

Costs are as for Arcane spells.

If you are a Psychic character (not permitted by default), then spells in Occult Mysteries, as well as any spells on your basic class list, can be used as your free spells when starting and levelling up. Otherwise they count as Uncommon, though a PC Psychic will probably have a source they can go to.

There is a restriction on how good some items can be. Weapons and armour are limited by their type, so bigger weapons and heavier armour are easier to enchant than smaller of lighter items.

Weapons are limited by the maximum damage they do. A weapon can have a maximum enhancement bonus equal to half it's maximum damage (round down), to a limit of +5. This is the base damage of the weapon. So a dagger (d4) is limited to +2, a longsword (d8) to +4. A small dagger (d3) is limited to +1.

Armour is limited to half the armour bonus (rounded up), to a maximum of +5.