When I begin writing a book, one of the first things I do is create my characters. Usually, depending on what type of story it will be, I randomly choose whatever names that come to me while I'm outlining the chapters. Because I believe fiction is loosely based on real life situations, it's easy to be reminded of people you've once known or draw from those who currently are a part of your life. Once I've identified and outlined all of my characters, I'm ready to begin writing.
Most writers set their stories in familiar locales. Being from the south, the majority of my stories come from there. I tend to use the cities, towns, counties and states that I've visited. Though I have used places I've never been, I believe being familiar with a place makes it easier to write about. But truth be told, it all depends on you. The characters and settings for your stories are yours to create......Get busy!