Pretty soon - this level or the next one. IIRC, you can start finding everything up to Daedric at level 7, although the probability is right next to impossible at that point. Higher levels increase it greatly, but it's still really low - don't be surprised if you find less than a dozen of good things after a full dungeon crawl. Don't expect every human enemy or pile of treasure yield one (or more) even at highest levels. Such things are as rare as Christmas. --- Walk softly. And carry a big gun.
If you can afford (or steal) them, the high end ("incense and soft music") shops that sell weapons and/or armor will have all types of weapons at level seven (although few and far between). I have found Mithral in these shops at level 3. Armor will usually start showing up a few levels after weapons of similar material. --- If you can't put it in figures, it's not fact, just mere opinion. - Laz Long
Don't get carried away with shops, though. I'd say there are only a few points when you need to get a new weapon from there the moment you see it:
a - get anything better than steel, your accuracy will jump really noticeably on any enemy; b - get Mithril or better, so that you don't need to worry about "your weapon is ineffective" any longer; c - in very special cases, get something appropriate in between a) and b), like something Dwarven for harpies.
Any other case is overdoing it, since you'll find something similar or better sooner or later, but you've already spent additional money. And with top materials the difference of several damage points is not so significant, so unless you don't know what to spend all your gold on, it's pretty pointless. But that all is for weapons. For armor, no need to worry whatsoever. If you can wear plate, you'll be sufficiently protected anytime, but trying to get a full suit of the latest material is fruitless. (Or maybe I'm the only one who is extremely unlucky with gauntlets?)
All of the above is only my opinion, though. Your mileage may vary. --- Walk softly. And carry a big gun.
The Elder Scrolls wiki says The Odd Blades in Daggerfall city is one of the best places to look for higher materials (I think it's the northern-most shop in the "hub" of shops - like most big cities have). --- -- "I'd like to thank god...for making me an atheist"
Okay, thanks guys for the great responses. I'm a *little* bit worried that something might be buggy on my save file or something, since I've done quite a lot of dungeon crawling since, say, level 4, and I've seen absolutely nothing above dwarven, but maybe that's a bit of bad luck. I might try the shop that the last poster mentioned.
At this point, my only real concern is that I get mithril before facing enemies that require mithril or better to hit.
Incidentally, I've often wondered what the thinking behind including both mithril and adamantium was. I know adamantium items have more enchantment points, but apart from that it just seems like a material that's too similar to mithril in functionality and too similar to ebony in appearance. --- -- "I'd like to thank god...for making me an atheist"
Okay, so I checked out the shop that clu mentions, and, at long last, I saw some mithril weapons. So, the game isn't bugging out on me after all, which is good to know. I'm guessing that my rather pedestrian luck stat (53) has been playing a role in not finding the stuff in dungeons so far.
In case anyone is interested in the conclusion of this tale, I'm now at 7th level and I'm finally finding mithril stuff around when dungeon crawling. I even picked up an ebony broadsword when one of Elysana's assassins tried to take me out.