Titus 3:5 And Justification By Faith Alone

Not by--Greek, "Out of"; "not as a result springing from works," &c. of righteousness--Greek, "in righteousness," that is, wrought "in a state of righteousness": as "deeds. . . wrought in God." There was an utter absence in us of the element ("righteousness") in which alone righteous works could be done, and so necessarily an absence of the works. "We neither did works of righteousness, nor were saved in consequence of them; but His goodness did the whole" [THEOPHYLACT].
we--emphatically opposed to "His."

mercy--the prompting cause of our salvation individually: "In pursuance of His mercy." His kindness and love to man were manifested in redemption once for all wrought by Him for mankind generally; His mercy is the prompting cause for our individual realization of it. Faith is presupposed as the instrument of our being "saved"; our being so, then, is spoken of as an accomplished fact. Faith is not mentioned, but only God's part. as Paul's object here is not to describe man's new state, but the saving agency of God in bringing about that state, independent of all merit on the man's part.

Excerpts taken from Jamieson, Fausset, and Brown Commentary