you model characters in 3D apps like Blender//Maya…ect, there are also a few apps like “make human” that you can use to make the basic model for you and then you can either import that model straight into UE4 or import into a 3D app like Blender to edit/modify it and then send it to UE4.
hope that helps:)
–EDIT–
also you could take a look at this thread, it has some good programs that might help:D