UE says system not compatible with DirectX12 while running DirectX12.

ok it seems you have a laptop maybe? or an APU rather than dedicated? i get the same on my laptop using intel graphics. it will possibly give you graphical glitches if you leave d3d12 but it will run (mine did anyway) consider changing to d3d11 though.

integrated graphics really are not the best and neither is the Intel 770 series really for Unreal dedicated or integrated, but dedicated would have been better