"He's become nothing more than an inhuman killing machine..."
Canon
Walter was buried nearby Toluca Lake and was seen at his gravesite. A reporter looking into his murders dug up his coffin and found it empty.
Walter performed the Holy Rite of Assumption, gaining 'the Power of Heaven' and the ability to create Otherworlds.
From beyond the grave, Walter committed several more murders and imprisoned Joseph Schreiber in his apartment, leading to his death.
Several years later, Henry Townshend moves into room 302. Walter watched over him, until he decided he would be the Receiver of Wisdom, locking him in his room.
Headcanon
As Walter was torn into two beings; the Adult ghost, a combination of Walter's soul and Valtiel, and the Young ghost, a manifestation of Walter's good, innocent qualities and part of his soul.
In death, Walter watched over the Order's activites
When the events of Silent Hill 3 occurred, Valtiel's focus shifted to the physical presence of God. Without his power or being driving Walter forwards, Walter fell 'asleep' for some time.
While torn apart, Walter's mind was literally scattered between mindless rage and single-minded focus on the ritual (as the Adult Walter) and being afraid, lost, and wanting to be safe with his mom (as the Child Walter).
Afterlife
Canon