Does this happen only with the Nokia app or have you tried another camera app with the same results?
I think I had the same. Camerapicture "waving". Not only in nokia camera app, also in others like google app.
Got good help from Nokia. After some tests I could send the phone to the repaircenter. After 9 days phone returned with new camera.
I think I had the same. Camerapicture with waves. Good help from Nokia. After some tests I could sent my phone to the repair centre.
After 9 days phone came back with new camera.
Contact nokia help, for me it worked.
Yes you have to factory reset your phone. Is no problem with a good backup.