Hi guys.
My iPhone is on 3.1.2 right now. I want to restore it to start new again but iTunes won't let me restore to 3.1.2

It forces me to update to 3.1.3
I know that if I update I'll lose my unlock so is there any way to restore to 3.1.2?

This question has been asked and answered a bunch of times on the forum, please check the stickies before asking a question or search around first to save people from answering repeat questions.

That said, if you're using a 3G, just download the 3.1.2 firmware from the internet (you can find it all sorts of places), run PwnageTool and create the custom firmware bundle, then shift-click on the update button in iTunes, point it to the .IPSW, and you should be good. The 3G does not do the SHSH check so there is nothing stopping you from applying the 3.1.2 update presently. You can skip the PwnageTool step if you're not jailbreaking, or if you intend to use redsn0w after the flash to jailbreak. PwnageTool is the only safe way to upgrade your firmware without upgrading your baseband so it is recommended you use that software. Also, PwnageTool only works on the Mac -- any Windows software that does the same thing is a cheap knockoff and is not recommended to be used as it does not work the same way and is not as reliable nor does it have the same level of support the dev team provides.

If you've got a 3GS however, the answer becomes a little more in-depth as the 3GS requires having an SHSH on file and using TinyTSS / Firmware Umbrella or Saurik's SHSH caching server -- which requires you to have already cached a legit SHSH for the 3.1.2 OS -- which can no longer be done.