Will having a residencia entitle me to lower charges when buying a house? I have been told that the normal charge is 7%, but with the residencia it is 3.5%.

NO I do not think so certainly not in the Valencia region unless it is different in other parts but I doubt it. Everyone pays 7% based on the declared value as written into the excritura (deeds) HOWEVER where is sometimes scope for a small reduction is the Land registry tax - if it is going to be your main residence (ie not a 2nd home/holiday home) the standard rate of 1% can sometimes be negotiated down. Remember if you dont ask you dont get! Having residencia IS BENEFICIAL for other reasons so I would recommend applying ASAP.