Iphone iCloud restore with wrong version of iOS

I am trying to restore my iphone from my iCloud backup. (I had to have the innards replaced after getting it wet.) I have logged in with my iCloud account. It gives my last iphone backup as 8 December 2014 and that is the one I want to use. But it says that iOS .8.1.2 is required, and that the phone only has iOS 8.0.2 on it. The only backup it will let me use is from 9 April 2014. I really don't want to use that one!! How do I get the phone to upgrade the iOS? Do I have to set it up as a new phone? Can I then pull down my iCloud backup later if I do that? I'm confused.

you can set up the device as new
once connected to wifi do the update from settings>software update
After update,
settings>general>erase all content and settings
and it will give u an option to restore from iCloud back up again

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