Galatians 2:16 Knowing that a man is not justified by the works of the law, but by the faith of Jesus Christ, even we have believed in Jesus Christ, that we might be justified by the faith of Christ, and not by the works of the law: for by the works of the law shall no flesh be justified.
Justification is the first step, sanctification is the second. Paul is not saying that we are sanctified, he is saying we are justified. If you want to be a priest of God the first step is to be justified, but then you must also be separated unto God. That is sanctification.
17 But if, while we seek to be justified by Christ, we ourselves also are found sinners, is therefore Christ the minister of sin? God forbid.
When you come to the Lord you confess your sins and He forgives you your sins. His blood pays the price for your sins so that you can be forgiven before God. That is not a free pass to sin. That does not mean He is saying that it is OK for you to sin, but not for the nations. Jesus Christ is not the minister of sin.
18 For if I build again the things which I destroyed, I make myself a transgressor.
Think of the Jewish religion as the egg shell and the church is the chicken that came out of the egg shell. When they came out of that shell they destroyed the shell. The goal is not to rebuild the Jewish religion as "the church". If you do that you expose yourself that you are a false prophet.
19 For I through the law am dead to the law, that I might live unto God.
The law told you what the requirements were for the Messiah. He came, He died on the cross, He paid the ransom with His blood. He fulfilled the requirement of the law. If you have received Jesus' redemption then you are also dead with Him to the flesh, to sin, to the world, and to your self. All the things that kept you from living unto God have died so now you are free to live to God in the resurrection life.
20 I am crucified with Christ: nevertheless I live; yet not I, but Christ liveth in me: and the life which I now live in the flesh I live by the faith of the Son of God, who loved me, and gave himself for me.
This is the point of being born again, Christ, the anointed one, lives in you. He loves you, He gave Himself for you, and He lives in You.
21 I do not frustrate the grace of God: for if righteousness come by the law, then Christ is dead in vain.
However, if you don't listen to the Lord in your spirit and heed your spirit you frustrate the grace of God. Living in sin grieves the Holy Spirit, Paul is not talking about that, he is talking about frustrating the grace of God. Each one of us, if we partake of the grace of God we will grow in grace and into our anointing to be a gift to the body. If you don't partake of the grace of God every day and exercise your spirit every day then you will frustrate that process. You will not enter into your anointing nor will you be a gift to the body. As a result you will have the sense that the Holy Spirit is frustrated with you.