This step is crucial. I went with construction grade pine for 2 reasons. It is cheap and it is readily available at big box stores. It is a hassle to make something nice with construction grade wood, but it may be worth it if you're inexperienced (like me) and/or you're going to paint the thing anyways.

Spend as much time as you need to find the lumber in decent condition. Look for knots in the wood, damage from storage methods, and bows in the faces or the edges of the boards. The assembly can work some small bows out but you want straight wood.