Shortly before SR1 was released Volition mentioned that Stilwater was located in the State of Michigan. This would also mean that Monica Hughes is a Michigan Republican Senator (her husband was a republican and in the Redlight Septic Avenger in SR2 she said she tried to continue her late husbands policies) and the "Steelport National Guard" are actually the Michigan National Guard.
Considering how close Steelport is to Stilwater it would mean that both cities are in the same general area (Saints are able to arrive in the city by boat and helicopter in a matter of minutes).
Interestingly enough one of the Plaques in the Courthouse in SR2 lists the court as "Stilwater County District Courthouse". Lastly Gat refers to Steelport as rust belt city in SR4, and coincidentally Michigan is considered by many to be a rust belt state. Finally in some interviews for SR3 Volition stated that Chicago was one of the main inspirations for Steelport.
TL;DR Version: Stilwater and Steelport are located in the fictional Stilwater County, Michigan, USA and both cities are located on a chain of islands in the Great Lakes that connect to the mainland via (theoretical) bridges and underwater tunnels.