You can use IPs, ex:
CREATE USER 'repl_user1'@'192.168.1.101' IDENTIFIED BY 'password1'; // Server1
CREATE USER 'repl_user2'@'192.168.1.102' IDENTIFIED BY 'password2'; // Server2
If you really want to use hostnames (and you don't already have some set up for your servers using DNS), just add them to your hosts file and reference those. Ex.:
/etc/hosts (server1)
127.0.0.1 localhost server1.local
192.168.1.101 server1.local
192.168.1.102 server2.local
/etc/hosts (server2)
127.0.0.1 localhost server2.local
192.168.1.101 server1.local
192.168.1.102 server2.local
Then set up the users:
CREATE USER 'repl_user1'@'server1.local' IDENTIFIED BY 'password1'; // Server1
CREATE USER 'repl_user2'@'server2.local' IDENTIFIED BY 'password2'; // Server2
That should work so both servers receive connections from their own host and the other as well and map it to the correct users.